Showing 1 - 10 of 222
This paper models financial contagion as a wealth effect of financial intermediaries in a market with two risky assets and three types of traders: noise traders who trade in one market, financial intermediaries who partially arbitrage away noise trading, and long-term investors who provide...
Persistent link: https://www.econbiz.de/10012717961
We solve a liquidation problem for an agent with preferences consistent with the prospect theory of Kahneman and Tversky (1978). We find that the agent is willing to hold a risky project with a relatively inferior Sharpe ratio if the project is currently making losses, and intends to liquidate...
Persistent link: https://www.econbiz.de/10012717727
We solve a liquidation problem for an agent with preferences consistent with the prospect theory of Kahneman and Tversky (1978). We find that the agent is willing to hold a risky project with a relatively inferior Sharpe ratio if the project is currently making losses, and intends to liquidate...
Persistent link: https://www.econbiz.de/10012762463
The roots of the 2008 financial crisis are often traced back to the collapse of the housing bubble. The factors that precipitated the crisis, and propagated its effects on firms and consumers to produce an economic contraction, are still the subject of ongoing debate among academics, policy...
Persistent link: https://www.econbiz.de/10009450957
We propose a new market design for trading financial assets. The design combines three elements: (1) Orders are downward-sloping linear demand curves with quantities expressed as flows; (2) Markets clear in discrete time using uniform-price batch auctions; (3) Traders may submit orders for...
Persistent link: https://www.econbiz.de/10013178169
We propose a new market design for trading financial assets. The design has three elements: (1) traders may place orders for any user-defined linear combination of assets,with arbitrary positive and negativeweights; (2) orders are downwardsloping piecewise-linear demand curves with quantities...
Persistent link: https://www.econbiz.de/10014081759
Can financial markets aggregate information dispersed among traders and allow traders to achieve their target inventories? To examine this question, we study a model of a double auction among finitely many traders who are all rational, strategic, risk averse, and informed about the value of a...
Persistent link: https://www.econbiz.de/10012966649
This paper combines dimensional analysis, leverage neutrality, and a principle of market microstructure invariance to derive scaling laws expressing transaction costs functions, bid-ask spreads, bet sizes, number of bets, and other financial variables in terms of dollar trading volume and...
Persistent link: https://www.econbiz.de/10012969188
We derive invariance relationships for a dynamic infinite-horizon model of market microstructure with risk-neutral informed trading,noise trading,marketmaking, and endogenous production of information. Invariance relationships for bet sizes and transaction costs are obtained under the assumption...
Persistent link: https://www.econbiz.de/10012969746
At this year's conference two panel discussions have been organized to address the most recent financial crisis and the associated policy implications. We recommend that you highlight your program schedule to ensure your participation in these engaging panel sessions
Persistent link: https://www.econbiz.de/10013038418