We study a search and bargaining model of an asset market, where investors' heterogeneous valuations for the asset are drawn from an arbitrary distribution. Our solution technique makes the model fully tractable and allows us to provide a full characterization of the unique equilibrium, in...

How do lenders use their reputation when participating in syndicated loans? I address this question by focusing on syndicate composition with respect to participants' reputation and its impact on loan spreads. I find that lender reputation enables it to compete in terms of choosing the types of...

We extend Duffie, Garleanu, and Pedersen's (2005) search-theoretic model of over-the-counter asset markets, allowing for a decentralized inter-dealer market with arbitrary heterogeneity in dealers' valuations or inventory costs. We develop a solution technique that makes the model fully...

We document that the deregulation of bank branching restrictions in the United States triggered a reallocation across sectors, with end effects on state-level volatility. This change in state-level volatility cannot be explained simply by shifts in sector-level returns and volatility. A...

Relying on confidential supervisory data related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test...

We argue that there is a connection between the interbank market for liquidity and the broader financial markets, which has its basis in demand for liquidity by banks. Tightness in the interbank market for liquidity leads banks to engage in what we term “liquidity pull-back,” which involves...

We integrate bank and bond financing into a two-sector neoclassical growth model to examine the stabilization effect of endogenous bank leverage adjustment. We show that although bank leverage amplifies shocks, the increase of leverage to a decline in bank equity is an automatic stabilizer in...

The paper rst shows that nancial market equilibria need not to exist if agents possesscumulative prospect theory preferences with piecewise-power value functions. This is due tothe boundary behavior of the cumulative prospect theory value function, which might causean innite short-selling...

I study the effects of short sale constraints in a rational framework with asymmetric information. I consider the cases of Bernoulli-distributed (à la Glosten and Milgrom) and continuously distributed (à la Kyle) liquidation values, and focus on the latter case.In this case my model is able to...

We propose that investment strategies should be evaluated based on their net-of-trading-cost return for each level of risk, which we term the "implementable efficient frontier." While numerous studies use machine learning return forecasts to generate portfolios, their agnosticism toward trading...