Safe assets are demanded to smooth consumption across states (both intertemporallyand in cross-section). Some of these assets are supplied publicly (governmentbonds) and some are created and supplied privately (such as mortgage-backedsecurities and asset-backed securities). Private assets are...

Safe assets are demanded to smooth consumption across states (both intertemporally and in cross-section). Some of these assets are supplied publicly (government bonds) and some are created and supplied privately (such as mortgagebacked securities and asset-backed securities). Private assets are...

"After the financial crisis of 2007-2008, analysts continue to question the security of banking sectors in nations in Europe, Latin America, Asia, and Africa. Why do such crises recur? What is it about the accumulation of bank debt that potentially jeopardizes national and global banking...

If you’ve got some money in the bank, chances are you’ve never seriously worried about not being able to withdraw it. But there was a time in the United States, an era that ended just over a hundred years ago, in which bank customers had to pay close attention to whether the banking system...

Short-term debt that can serve as a medium of exchange is designed to be information insensitive. No one should be tempted to acquire private information to gain an informational advantage in trading that could destabilize the value of the debt. Short-term debt minimizes the incentive to acquire...

A financial crisis is an event of sudden information acquisition about the collateral backing short-term debt in credit markets. When investors see a financial crisis coming, however, they react by more intensively acquiring information about firms in stock markets, revealing those that are...

How did problems with subprime mortgages result in a systemic crisis, a panic? The ongoing Panic of 2007 is due to a loss of information about the location and size of risks of loss due to default on a number of interlinked securities, special purpose vehicles, and derivatives, all related to...

Understanding the ongoing credit crisis or panic requires understanding the designs of a number of interlinked securities, special purpose vehicles, and derivatives, all related to subprime mortgages. I describe the relevant securities, derivatives, and vehicles to show: (1) how the chain of...

Credit Booms are not rare; some end in a crisis (bad booms) while others do not (good booms). We document that credit booms start with an increase in productivity growth, which subsequently falls faster during bad booms. We develop a model in which crises happen when credit booms change to an...