The literature on information aggregation predicts that market growth unambiguously reduces uncertainty about the value of traded goods. The results were developed within the classical model, which assumes that traders’ values for the exchanged good are determined by fundamental (common)...

We develop a model of decentralized markets in which trading environment is determined by a general network structure. We study how the equilibrium allocation and liquidity depend on the network topology and how an agent’s risk exposure depends on other agents’ exposures. Agents hold...

We derive analytic valuation formulas for range accrual notes and spread range accrual notes under an affine term structure model with jump risks. We show that the value of a range accrual note can be significantly affected by the choice of interest rate model and the arrival intensity of jump...

In this paper, we provide an analytic valuation method for European-type contingent claims written on multiple assets in a stochastic market environment. We employ a two-state Markov regime-switching volatility in order to reflect the stochastically-changing market condition. The method is...

We derive analytic valuation formulas for range accrual notes and spread range accrual notes under an affine term structure model with jump risks. We show that the value of a range accrual note can be significantly affected by the choice of interest rate model and the arrival intensity of jump...

This paper introduces a model of preferences, in which, given beliefs about uncertain outcomes, an individual evaluates an action by a quantile of the induced distribution. The choice rule of Quantile Maximization unifies maxmin and maxmax as maximizing the lowest and the highest quantiles of...

Auctions often involve the sale of many related goods: Treasury, spectrum, and electricity auctions are examples. In multi-unit auctions, bids for marginal units may affect payments for inframarginal units, giving rise to “demand reduction” and furthermore to incentives for shading bids...

The authors present a classroom experiment designed to illustrate key concepts of third-degree price discrimination. By participating as buyers and sellers, students actively learn (1) how group pricing differs from uniform pricing,(2) how resale between buyers limits a seller's ability to price...