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...

This paper addresses large markets where agents cannot commit to sign exclusive contracts may induce agents to promise the same asset to multiple counterparties and subsequently default. Is how that in such markets an intermediary can increase welfare by simply setting limits on the number of...

In “Using Collateral to Secure Loans,” Yaron Leitner asks: Why is collateral used to secure some loans, but not others? And why does collateral potentially involve more risk? He considers these questions, looking at some of the explanations for using collateral, focusing on its benefits and...

In "A Lifeline for the Weakest Link? Financial Contagion and Network Design," Yaron Leitner describes how contagion can occur, explains why the threat of contagion is not necessarily a bad thing, and shows why some firms may choose to bail out other firms that are facing financial problems.