We study liquidity supply in fragmented markets. Market makers intermediate heterogeneous order flows, trading off spread revenue against inventory costs. Applying our model to payment for order flow (PFOF), we demonstrate that portfolio-based considerations of inventory management incentivize market makers...

We study a noisy general rational expectations equilibrium in an economy with big trading data, populated by asymmetrically informed logarithmic investors. We show that the equilibrium can be either fully or partially revealing about macroeconomic shocks privately observed by informed...

How do resolution frameworks affect the private restructuring of distressed banks? We model a bank’s shareholders and creditors negotiating a restructuring, under two frictions: asymmetric information about asset quality, and externalities on the government. High-quality banks signal themselves by delaying...

We propose a model of financial intermediation, payments choice, and privacy in the digital economy. While digital payments enable merchants to sell goods online, they reveal information to their lender. Cash guarantees anonymity, but limits distribution to less efficient offline venues. In equilibrium, merchants...

We develop a dynamic model of a multi-asset over-the-counter (OTC) market that operates via search and bargaining and empirically test its implications regarding liquidity in the cross section of assets. The key novelty in our model is that investors can...

In a canonical takeover model we let an informed large shareholder choose between making a bid or initiating a sale to another acquirer. Such takeover activism complements direct takeovers because the very choice mitigates the asymmetric information problem, thereby improving...