Current legislation attempts to solve incentive problems in bank regulation, by instituting polices such as risk-adjusted deposit insurance premiums, strict capital requirements, prompt closure policies, etc. Recent theoretical works have shown such policies to be neither necessary nor...

A major theme in the literature on bank regulation is that greater reliance on market forces can help alleviate the moral hazard problem inherent in government sponsored deposit insurance. Proposals include minimum requirements on (1) uninsured subordinated debt financing (either fixed-term or...

This paper develops a theory of efficient design of financial securities when different parties in a corporate relationship contract under multilateral asymmetric information. A methodology for analyzing general financial contracting games is proposed. Rigorous, game-theoretic criteria such as...

This paper models efficient design of bankruptcy mechanisms under multi-lateral asymmetric information as a problem involving the joint-reallocation of i) existing debt claims of differing priority against the firm, and ii) the rights to control and run the firm in the event of a reorganization...

This paper rigorously examines the prevalent belief that financial market corners and short squeezes reduce trading efficiency, especially when traders are privately informed. Explicit welfare criteria are proposed, and a trading model based on direct revelation mechanism design methodology is...