It has been long recognized that endogenous default probabilities cannot explain spreads between corporate and the riskless bonds. Recently, this issue has been subjected to rigorous scrutiny. Previous studies have found that for investment-grade debt, structural models explain only 15-25% of...

In this paper, we investigate components of the bond bid-ask spreads for the emerging market in Russian sovereign bonds in the late 90s. We identify the size of the bid-ask spreads with liquidity because many of trades in illiquid securities happen in closed transactions and accurate information...

An ability to postpone one's execution without penalty provides an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution price from market expectations and quotes. This theory...

I provide a theoretical model for two empirical phenomena observed in the NYSE and Nasdaq markets. First is the bid-ask bounce recently studied by Heston, Korajczuk and Sadka (HKS, 2008) for high-frequency data. Second is a temporary liquidity squeeze observed by Madureira and Underwood (2008)...

There is not much doubt in the public mind that the dot-com boom on NASDAQ in the end of 90s represented a bubble. Indeed, major violations of rationality were observed. For instance, some dot-coms, which terminated their business still held positive market value. A market cap of the Internet...

In my essay, I formulate an alternative scenario for the current crisis of the US financial system. Unintended and poorly understood consequences of the Gramm-Leach-Bliley (1999) banking reform and, especially, the Bankruptcy Abuse Prevention and Consumer Protection Act (2005) created numerous...

The working paper has been superseded by the book quoted above. My own comments on the published book are provided below. The book was prepared without professional editing and proofreading was done on my own account. Hence, the book contains many errors, which could only be corrected by paying...

We examine the composition of return volatility, serial correlation, and trading costs before and after decimalization on the New York Stock Exchange. We decompose the variance of price changes into components associated with public news, rounding errors, and market-making frictions. We find...

We report further evidence of the difference in execution costs between Nasdaq and the NYSE before and after the 1997 market reforms. We find that informed trading costs are consistently higher on Nasdaq both before and after the reforms. In the pre-reform period the Nasdaq-NYSE disparity in...