Liquid markets where agents have limited capacity to sign exclusive contracts may permit agents to promise the same asset to multiple counterparties and subsequently default. I show that in such markets an exchange can arise as an intermediary whose only role is to set limits on the number of...

We study trade between an informed seller and an uninformed buyer who have existing inventories of assets similar to those being traded. We show that these inventories could induce the buyer to increase the price (a run-up) but could also make trade impossible (a freeze) and hamper information...

Superseded by Working Paper 15-10.<p> We study an optimal disclosure policy of a regulator who has information about banks’ ability to overcome future liquidity shocks. We focus on the following trade-off: Disclosing some information may be necessary to prevent a market breakdown, but disclosing...</p>

Supersedes Working Paper 13-26<p>. We study an optimal disclosure policy of a regulator that has information about banks’ ability to overcome future liquidity shocks. We focus on the following tradeoff: Disclosing some information may be necessary to prevent a market breakdown, but disclosing too...</p>

This paper supersedes Working Paper No. 12-8. We study trade between an informed seller and an uninformed buyer who have existing inventories of assets similar to those being traded. We show that these inventories may lead to prices that increase even absent changes in fundamentals (a .run-up.),...

Regulators collect and produce information about banks. This information helps regulators monitor the safety and soundness of the banking system, and it also helps policymakers preserve financial stability. A key issue is whether this information should be made public and, if so, to what extent....

Government bailouts during the recent financial crisis were controversial because of the burden on taxpayers and because even if taxpayers eventually get their money back, such bailouts can undermine banks’ incentives not to take excessive risk in the future. New regulatory reforms aim to...

This paper is superseded by Working Paper No. 13-14. We study trade between a buyer and a seller who have existing inventories of assets similar to those being traded. We analyze how these inventories affect trade, information dissemination, and prices. We show that when traders’ initial...

When contracts are unobserved (and nonexclusive), agents can promise the same asset to multiple counterparties and subsequently default. I show that a central mechanism can extract all relevant information about contracts that agents enter by inducing them to report one another. The mechanism...