Can central counterparty (CCP) clearing control counterparty risk in the presence of risk taking that can aggravate such risk? When counterparty risk is not observable, I show that central clearing leads to higher collateral requirements for two different reasons. Without collusion about risk...

We develop a dynamic model of DeFi lending that incorporates the following key features: 1) borrowing and lending are decentralized, anonymous, overcollaterlized, and backed by the market value of crypto assets where contract terms are pre-specified and rigid; and 2) information friction exists...

We develop a model of monetary exchange in over-the-counter markets to study the effects of monetary policy on asset prices and standard measures of financial liquidity, such as bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy, both by participating in the...

We develop a model of monetary exchange in over-the-counter markets to study the effects of monetary policy on asset prices and standard measures of financial liquidity, such as bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy, both by participating in the...

We develop a model of monetary exchange in over-the-counter markets to study the effects of monetary policy on asset prices and standard measures of financial liquidity, such as bid-ask spreads, trade volume, and the incentives of dealers to supply immediacy, both by participating in the...

I build a dynamic model of the shadow banking system that intermediates funds through the interbank repo market to understand its failing mechanism during the recent financial crisis. The model emphasizes a key friction, the maturity mismatch between short-term repo and long-term investments...

Canada's mortgage insurance risk needs a better backstop fund, according to a new report released today by the C.D. Howe Institute. In “Mortgage Insurance as a Macroprudential Tool: Dealing with the Risk of a Housing Market Crash in Canada,” authors Thorsten V. Koeppl and James MacGee...