Before 2007, financial crises were not widely studied in economics and finance. The lack of importance ascribed to financial stability and our limited knowledge of this topic were significant contributors to the crisis. This paper suggests five areas where new theories are needed. These are...

As a reaction to the general suspicion that margin loans had been a key element of the stock market boom and crash of the late 1920s, the Federal Reserve Bank was empowered to regulate margin lending with the Securities and Exchange Act. The efficacy of the Federal Reserve's margin policy has...

We use a Diamond/Dybvig-based model with two banks operating in separate regions connected by a common asset market in which banks and sophisticated depositors invest. We study the effect of a potential run (crisis) and subsequent fire sales on the asset price in both the crisis and no-crisis...

Price bubbles in an Arrow-Debreu valuation equilibrium in infinite-time economy are a manifestation of lack of countable additivity of valuation of assets. In contrast, known examples of price bubbles in sequential equilibrium in infinite time cannot be attributed to the lack of countable...

Asset prices have recently become a common topic in economic debate. Nevertheless,much time has been spent in determining if they e®ectively exhibit a bubble component,and not in examining whether asset prices a®ectively contain relevant information concern-ing future market developments. This...

Asset price bubbles can arise unintentionally when one uses continuous-time diffusion processes to model financial quantities. We propose a flexible damped diffusion framework that is able to break many types of bubbles and preserve the martingale pricing approach. Damping can be done on either...

Asset prices have recently become a common topic in economic debate. Nevertheless, much time has been spent in determining if they effectively exhibit a bubble component, and not in examining whether asset prices affectively contain relevant information concerning future market developments....

Asset prices have recently become a common topicin economic debate. Nevertheless, much time hasbeen spent in determining if they effectively exhibita bubble component, and not in examining whetherasset prices contain relevant information concerningfuture market developments. This paper is...

Under an inflation-targeting regime, the central bank's primary responsibility is attaining price stability. With the large fluctuations in asset prices, being closely linked to financial and macroeconomic instability, monetary authorities have recognized the harsh effects of asset price bubbles...

Asset prices have recently become a common topic in economic debate. Nevertheless, much time has been spent in determining if they effectively exhibit a bubble component, and not in examining whether asset prices affectively contain relevant information concerning future market developments....