We study the reaction of nancial markets to aggregate liquidity shocks when traders face cognition limits. While each financial institution recovers from the shock at a random time, the trader representing the institution observes this recovery with a delay, reflecting the time it takes to...

This paper develops a search and matching model of an over-the-counter market for credit derivatives. In equilibrium, the large volume of bilateral trade creates a network of credit exposures in which banks are linked together by a complex liability structure, with gross credit exposures that...

The last 20 years have been marked by a sharp rise in international demand for U.S. reserve assets, or safe stores-of-value. We argue that these trends in international capital flows are likely to be a boon for some (by a lot) but a bane for others (by less). The young benefit from a capital...