The variety of financial products available to firms has expanded rapidly in recent decades. We study how this expansion shapes capital allocation, combining granular data on security issuance with a model of strategic product choice. We present three key findings....

Exchange-Traded-Funds, smart beta products, and many index-based vehicles are composite securities (CSs) facilitating trading systematic factors through reducing investors' duplicated costs in trading multiple securities. We analytically show that CS designers in competition optimally select liquid underlying assets representative of...

Using a backward stochastic differential equation (BSDE) framework, we examine the principal-agent problem in a finite-horizon continuous-time setting where the agent’s effort is a continuous choice, and the principal can impose non-pecuniary punishments. We show that the agent’s optimal incentive...

This paper examines how the shift from closed banking to open banking --- where borrower data become accessible to more financial institutions --- affects lending competition, credit availability, and resource allocation in underbanked markets. We develop a common-value auction model...

We study pricing dynamics and risk-sharing in a market with rational investors and a Q-learning trader. The Q-learner’s trading generates a feedback loop in prices: their demand for the risky security depends on their perceived benefit from trading, which in...

This study examines currency competition between the Dollar and Bitcoin, focusing on monetary policy. Using theory and lab experiments, we show that proportional transfers (interest on Dollar balances) operate in two regimes. Depending on inflation expectations, policy may raise Dollar...