We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. The endogenous benefit of opacity is lower fragility when profitability is expected to...

In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders. A Hasbrouck (1991) structural vector autoregression shows that the facility increased...

This paper considers the problem of estimating a linear model between two heavy-tailed variables if the explanatory variable has an extremely low (or high) value. We propose an estimator for the model coefficient by exploiting the tail dependence between the two variables and prove its...

We consider boundedly rational agents who do not plan over the infinite future but make trading plans at a finite, arbitrary horizon. We investigate the role of that horizon in the price dynamics of an asset in a Lucas tree model. We then design a laboratory experiment to test our theoretical...

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal funds futures data. The uncertainty is highest when it...

The primary focus of this paper is to study conflict of interest in the brokerage market. Brokers face a conflict of interest when the commissions they receive from investors differ from the costs imposed by different trading venues. I construct a model of limit order trading in which brokers...

Following the financial crisis, there has been increased regulatory focus on the management of liquidity in mutual funds and, specifically, whether funds hold enough liquidity to guard against the potential for investor runs. Using a novel, detailed regulatory dataset on the portfolio holdings...

Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment. When...

Many policy-makers and researchers view the recent financial and real economic crises across North America, Europe and beyond as a global phenomenon. Some have argued that this global recession has a common source: the U.S. financial crisis. This paper investigates the extent to which a credit...