We consider a dynamic limit order market in which traders optimally choose whether to acquire information about the asset and the type of order to submit. We numerically solve for the equilibrium and demonstrate that the market is a "volatility multiplier": prices are more volatile than the...

Statistical default models, widely used to assess default risk, fail to account for a change in the relations between different variables resulting from an underlying change in agent behavior. We demonstrate this phenomenon using data on securitized subprime mortgages issued in the period...