Two types of agents have diverse beliefs about the law of motion for an exogenous endowment. One type knows the true law of motion and the other learns about it via Bayes' theorem. Financial market structure affects the dynamics of the distribution of financial wealth. When markets are complete,...

This paper investigates a model of strategic interactions in financial networks, where the decision by one agent on whether or not to default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism introduced in the seminal contribution...

The sentiment of news predicts the short-term stock market performance of individual companies. We find that this association is solely due to the idiosyncratic informational content of an article. We transparently quantify the association between news sentiment and stock market performance of...

This paper measures valuation and strategic uncertainty in an over-the-counter market. The analysis uses a novel data set of price estimates that major financial institutions provide to a consensus pricing service. We model these institutions as Bayesian agents that learn from consensus prices...

The sentiment of news predicts the short-term stock market performance of individual companies. We find that this association is solely due to the idiosyncratic informational content of an article. We transparently quantify the association between news sentiment and stock market performance of...

The fact that money, banking, and financial markets interact in important ways seems self-evident. The theoretical nature of this interaction, however, has not been fully explored. To this end, we integrate the Diamond (1997) model of banking and financial markets with the Lagos and Wright...

Central banks play a crucial role in promoting financial stability. They act as financial system stabilizers through their capacity to create liquidity and channel it to financial institutions and markets in times of stress - a role that has evolved and expanded substantially over the past 15...

This paper investigates a model of strategic interactions in financial networks, where the decision by one agent on whether or not to default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism introduced in the seminal contribution...

In this paper we contribute to the debate on macro-prudential regulation by assessing which structure of the financial system is more resilient to exogenous shocks, and which conditions, in terms of balance sheet compositions, capital requirements and asset prices, guarantee the higher degree of...

In this paper we develop a model of shock propagation in the banking system with feedback channels towards the real economy. Our framework incorporates the interactions between the network of banks (exhibiting contagion mechanisms among them) and the network of firms (transmitting shocks to each...