This paper studies an equilibrium model with heterogeneous agents, asset price bubbles, and trading constraints. Market liquidity is modeled as a stochastic quantity impact from trading on the price. Bubbles are larger in liquid markets and when trading constraints are more binding. Systemic...

This paper estimates term risk premium and expected future spot rates embedded in Treasury forward rates to study the impact of short-term funding shortages on these quantities. Our approach is consistent with dynamic equilibrium models and avoids the arbitrage-free dynamic inconsistency...

We develop a dynamic equilibrium asset pricing model with heterogeneous beliefs to study the effects of monetary policy on prices, risk premia, asset price bubbles, and financial stability. Bubble risk premia arise from an interaction between disagreements among investors and dynamic trading...

Climate mitigation policies are being introduced around the world to limit global warming, generating new risks to the economy. This paper develops a continuous time heterogeneous agents model to study the impact of carbon pricing policy shocks on corporate default risk and the consequent...

This paper studies the effects of borrowers' balance sheet heterogeneity on economywide risks and fragility, together with effects from intermediary balance sheet channel. We build a continuous time heterogeneous agents model with financial frictions and analytically characterize the transition...

On September 21st, 2016, the Bank of Japan (BOJ) embarked on a new unconventional monetary policy, called yield curve control (YCC). We show that YCC creates an arbitrage opportunity in an otherwise frictionless and arbitrage-free government bond market which financial institutions can exploit....

The COVID-19 pandemic has pushed many firms to the edge of bankruptcy and revived concerns of a prolonged/deep recession. The government has introduced various policies to mitigate its economic impact. We build a continuous time heterogeneous agent model to study (i) corporate bankruptcy risks,...

This paper explores the financial stability implications of acute physical climate change risks using a novel approach focusing on a severe season associated with a series of tropical cyclone and flood events. Our approach was recently applied to study physical risks in the Mexican financial...

This paper explores a novel forward-looking approach to study the financial stability implications of climate-related transition risks. We develop an integrated micro-macro framework with a new class of scenario called delayed-uncertain pathways. An additional stochastic financial modeling layer...