deposit-taking franchises. Levered intermediaries’ heightened incentive to absorb risk helps to counteract liquidity …I study a model of market-liquidity provision by levered intermediaries that, besides operating trading desks, run …. However, liquidity provision may also overshoot, leading to unhealthy price bubbles and causing asset origination to become …

This paper applies the dichotomous theory of choice by Zou (2000a) tothe analysis of investmentstrategies and security …

: undiversifiable interest rate risk and shocks to aggregate liquidity demand. Mutual funds are inefficient when the economy faces … undiversifiable interest rate risk. However, if only aggregate liquidity demand is stochastic, mutual funds can implement the social …I analyze welfare properties of mutual funds in the Diamond-Dybvig model with two sources of aggregate risk …

extensive number of robustness checks. Overall, downside cash flow risk is priced most consistently across different samples … ability. The downside cash flow risk premium is mainly attributable to small stocks. The risk premium for large stocks appears … much more driven by a compensation for symmetric, cash flow related risk. Finally, we multiply our premia estimates by …

This paper examines the pricing of public debt in a quantitative macroeconomic model with government default risk …. We analyze the conditions under which expected default risk premia can quantitatively rationalize sizeable spreads on … public bonds. Sovereign default risk premia turn out to emerge at either very high debt to output ratios, or if the variance …

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion … may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA … their risk aversion parameter invest less in risky assets than wealthy investors with identical risk aversion uncertainty. …