A well-known puzzle in international finance is the equity home bias. This paper illustrates a mechanism where exchange rate estimation risk causes equity home bias. Estimation risk is introduced into a standard mean-variance portfolio framework by having return time series with different...

Which strategy-proof nonbossy mechanisms exist in a model with a finite number of indivisible goods (houses, jobs, positions) and a perfectly divisible good (money)? The main finding is that only a finite number of distributions of the divisible good is consistent with strategy-proofness and...

We develop a stochastic dynamic model of bank value maximization under limited liability and in which bankruptcy can occur. Main issues are banks’ optimal responses to regulation and credit-losses. We show that risk-neutral banks behave as if they were risk-averse when they are...

We extend the Shapley-Scarf (1974) model - where a finite number of indivisible objects is to be allocated among a finite number of individuals - to the case where the primary endowment set of an individual may contain none, one, or several objects and where property rights may be transferred...

We extend the Shapley-Scarf (1974) model - where a finite number of indivisible objects is to be allocated among a finite number of individuals - to the case where the primary endowment set of an individual may contain none, one, or several objects and where property rights may be transferred...

Which strategy-proof nonbossy mechanisms exist in a model with a finite number of indivisible goods (houses, jobs, positions) and a compensating perfectly divisible good (money)? The main finding is that only a finite number of distributions of the divisible good is consistent with...

The financial crisis that erupted 2007-2008 has reinforced demand for regulation of banks. The Basle III accord which is to be implemented January first 2013 encompasses two types of regulations with the goal to enforce more prudence among banks. One is capital adequacy regulation which...

The author address the question of optimal capital ratio in banking, particularly the fact that banks' risk-weighted capital is substantially larger than the stipulated reserve requirements by the Bank of International Settlements. With a factor model for the value of entrepreneurs' projects and...