This paper studies how a bank’s diversification affects its own risk taking behavior and the risk taking of competing, nondiversified banks. By combining theories of bank organization, market structure and risk taking, I show that greater geographic diversification of banks changes a bank’s...

Recent standard-setting activity related to fair value accounting has injected new life into questions of whether fair value provides information useful for decision-making, and whether there might be unintended consequences on financial stability. This discussion paper provides insight into...

This paper finds strong evidence that many individuals choose to pay credit card bills even at the cost of mortgage delinquencies and foreclosures. While the popular press and some recent literature have suggested that this choice may emerge from steep declines in housing prices, we find...

This note’s aim is to investigate the sensitivity of Christakis and Fowler’s claim (NEJM July 26, 2007) that obesity has spread through social networks. It is well known in the economics literature that failure to include contextual effects can lead to spurious inference on “social network...

This paper presents a structural debt valuation model that links default probabilities and recovery rates of corporate securities to asset market liquidity. This linking is advantageous for risk management and regulation of financial institutions in that it provides a method of calibrating the...

This paper evaluates the presence of racial disparities in the issuance of consumer credit. Using a unique and proprietary database of credit histories from a major credit bureau, this paper links location-based information on race with individual credit files. After controlling for the...

Following the failure of Lehman Brothers in September 2008, short-term credit markets were severely disrupted. In response, the Federal Reserve implemented new and unconventional facilities to help restore liquidity. Many existing analyses of these interventions are confounded by identification...

We study a model of portfolio choice, in which housing prices are predictable and adjustment costs must be paid when there is a housing transaction. We show that two state variables affect the agent's decisions: (i) his wealth-house ratio; and (ii) the time-varying expected growth rate of...

There is a popular belief that the confluence of bank capital rules and fair value accounting helped trigger the recent financial crisis. The claim is that questionable valuations of long term investments based on prices obtained from illiquid markets created a pro-cyclical effect whereby mark...

Conventional wisdom about individuals who have gone bankrupt is that they find it very difficult to get credit for at least some time after their bankruptcy. However, there is very little non-survey based empirical evidence on the availability of credit post-bankruptcy. This paper makes two...