We develop a model of securitized (Originate, then Distribute) lending, in which both publicly observed aggregate shocks to values of securitized loan portfolios, and later some asymmetrically observed discernment of varying qualities of subsets thereof, play crucial roles. We nd that...

Busts after periods of prolonged prosperity have been found to be catastrophic. Financial institutions increase their leverage and shift their portfolios towards projects that were previously considered too risky. This results from institutions rationally updating their expectations and becoming...

Bailing out banks requires overcoming debt overhang, in order to sustain their incentives for new lending, as well as dealing with adverse selection with respect to the quality of banks’ balance sheets. We examine bailouts that eliminate debt overhang, while attempting to minimize subsidies to...

Bailing out banks requires overcoming debt overhang as well as dealing with adverse selection with respect to the quality of banks' balance sheets, in terms of heterogeneity in both the likelihood and extent of their potential shortfalls, of future asset values vis-à-vis contractual debt...

We develop a theory of control rights in the context of licencing interim innovative knowledge for further development, which is consistent with the inalienability of initial innovator's intellectual property rights. Control rights of a downstream development unit, a buyer of the interin...

We consider a model of optimal bank closure rules (cum capital replenishment by banks), with Poisson-distributed audits of the banks asset value by the regulator, with the goal of eliminating (ameliorating) the incentives of levered bank shareholder/mangers to take excessive risks in their...

We compare competitive equilibrium outcomes with and without trading by a privately informed ¶monopolistic¶ insider, in a model with real investment portfolio choices ex ante, and noise trading generated by aggregate uncertainty regarding other agents intertemporal consumption preferences. The...