Papers
Uploaded: Oct 4, 2025
The Rise of Specialized Financial Products
The variety of financial products available for firms to raise funds has expanded rapidly in recent decades. This paper studies the role of innovations that introduce specialized financial products using a combination of granular data and a parsimonious model of...
Uploaded: Oct 4, 2025
The Rise of Factor Investing: "Passive" Security Design and Market Implications
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...
Uploaded: Oct 3, 2025
Debt and the Optimal Incentives Over Time
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...
Uploaded: Oct 3, 2025
When Silicon Valley Meets Wall Street: A Theory of Financial Overengineering
We study a model `a la Kyle (1985) where a trading firm hires a financial engineer to develop proprietary technology for an informational edge. The signal produced through this hiring is firm-specific and non-contractible, leading to a bilateral monopoly in...
Uploaded: Oct 3, 2025
Capital Structure and ESG Integration
We analyze how borrowers’ capital structure affects their incentives to integrate ESG. Borrowers may pursue socially valuable but financially underperforming projects to reduce expected payments to outside investors. These financial gains are amplified when the payoffs of investor-held securities are...
Uploaded: Oct 2, 2025
A Model of Supplier Finance
We develop a theoretical model of supplier finance where an intermediary (e.g., a large buyer) pools trade credit and allocates liquidity across heterogeneous suppliers. Optimal supplier finance creates profit-driven liquidity cross-subsidization and explains selective supplier inclusion as an equilibrium outcome....
