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ability of a bank to restructure the borrower's firm in the case of distress, the possibility to appropriate private benefits …
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An important goal of financial risk regulation is promoting coordination. Law's coordinating function minimizes costly conflict and encourages greater uniformity among market participants. Likewise, privately developed market standards, such as standard-form contracts and rules incorporated into...
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We analyze in some detail the full pre-deposit game in a simple, tractable, yet very rich, banking environment. How does run-risk affect the optimal deposit contract? If there is a run equilibrium in the post-deposit game, then the optimal contract in the pre-deposit game tolerates runs for...
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The regulatory framework of Basel III features joint requirements on bank capital and liquidity. I study such … requirements by developing a general equilibrium model with bank runs in a global game framework. The model highlights the role of … noisy information for studying liquidity and shows that bank runs are inevitable. Risk shifting induces excessive leverage …
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