Foster and Hart proposed an operational measure of riskiness for discrete random variables. We show that their defining equation has no solution for many common continuous distributions. We show how to extend consistently the definition of riskiness to continuous random variables. For many...

We show that binomial economies with financial assets are an informative and tractable model to study endogenous leverage and collateral equilibrium: endogenous leverage can be highly volatile, but it is always easy to compute. The possibility of default can have a dramatic effect on...

We show that binomial economies with financial assets are an informative and tractable model to study endogenous leverage and collateral equilibrium: endogenous leverage can be highly volatile, but it is always easy to compute. The possibility of default can have a dramatic effect on...

We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals' holdings inside and outside the pension system, we find substantial heterogeneity within and between passive and active investors in terms of labor income, financial wealth,...

We characterize the optimal default fund in a defined contribution (DC) pension plan. Using detailed data on individuals and their holdings inside and outside the pension system, we find substantial heterogeneity among default investors in terms of labor income, financial wealth, and stock...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. First, our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...

Foster and Hart propose a measure of riskiness for discrete random variables. Their defining equation has no solution for many common continuous distributions. We show how to extend consistently the definition of riskiness to continuous random variables. For many continuous random variables, the...