We study liquidity transfers between banks through the interbank borrowing and asset sale markets when, (i) surplus banks providingliquidity have market power, ii) there are frictions in the lendingmarket due to moral hazard, and, (iii) assets are bank-specific. We show that when the outside...

We present a model that can explain a sudden drop in the amount of money that can be borrowed against an asset, even in the absence of asymmetric information or fears about the value of the collateral. Three features of the model are essential: (i) the debt has a much shorter tenor than the...

Fire sales that occur during crises beg the question of why sufficient outside capital does not move in quickly to take advantage of fire sales, or in other words, why outside capital is so slow-moving. We propose an answer to this puzzle in the context of an equilibrium model of capital...

We study liquidity transfers between banks through the interbank borrowing and asset sale markets when(i)surplus banks providing liquidity have market power, ii)there are frictions in the lending market due to moral hazard, and(iii)assets are bank-specific. We show that when the outside options...

What is the effect of financial crises and the irresolution on banks' choice of liquidity? When banks have relative expertise in employing risky assets, the market for these assets clears only atre-sale prices following a large number of bank failures. The gains from acquiring assets atre-sale...

Financial crises are often accompanied by an outflow of foreign portfolio investment and an inflow of foreign direct investment(FDI). We provide an agency-theoretic framework that explains this phenomenon. We show that during crises, agency problems affecting domestic firms are exacerbated, and,...

The forward premium anomaly, i.e., the empirical evidence that exchange rate changes are negatively related to interest rate differentials, is one of the most robust puzzles in financial economics. We add to this literature by recasting the underlying parity relation in terms of cross-country...

Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. Unlike previous studies, we have detailed cash flow data for each fund, rather than aggregate or accounting returns. We also know the...

Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. Unlike previous studies, we have detailed cash flow data for each fund, rather than aggregate or accounting returns. We also know the...

Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. Unlike previous studies, we have detailed cash flow data for each fund, rather than aggregate or accounting returns. We also know the...