Should regulators encourage the migration of trade from over-the-counter (OTC) to centralized markets? To address this question, we consider a model of equilibrium and socially optimal market participation of heterogeneous banks in an OTC market, in a centralized market, or...

We propose a new model of interdealer trading. Dealers trade together to reduce their inventory holding costs. Core dealers share these costs efficiently and provide liquidity to peripheral dealers, who have heterogeneous access to core dealers. We derive predictions about...

We study a signaling game in which an issuer with private information about the distribution of the project’s cash flows designs a security to sell to an uninformed investor to raise financing for the project. The investor faces Knightian uncertainty...

Despite the empirical prevalence of debt overhang, existing research has found little evidence of risk-shifting. To understand this discrepancy, we augment a traditional feedback model with an important feature: investors’ endogenous learning. We show that more ex-ante inefficient opportunities for...

We model the widespread failure of contracts to share risk using available indices. A borrower and lender can share risk by conditioning repayments on an index. The lender has private information about the ability of this index to measure the...

We present a general equilibrium model of labor market ows that features a periodic equilibrium in which turnover is high in some periods and low in others. If a firm fi nds itself in a periodic equilibrium, it is optimal...