We study equilibrium trading strategies, market liquidity, and price efficiency in an economy in which a fraction of better-informed speculators displays preferences consistent with Kahneman and Tversky’s (1979) Prospect Theory, i.e., loss aversion, risk seeking over losses, and nonlinear and...

We study the impact of outright (i.e., permanent) Open Market Operations (POMOs) by the Federal Reserve Bank of New York (FRBNY) on the microstructure of the secondary U.S. Treasury market. POMOs are trades in U.S. Treasury securities aimed at accomplishing the Federal Reserve’s target level...

The recent episodes of financial turmoil in Mexico, East Asia, Russia, Brazil, and Argentina are often dubbed financial crises. However, the severe downturns in equity markets, abrupt currency devaluations, and massive capital flight that characterize these events can still be deemed compatible...