This paper theoretically studies the effects of Knightian Uncertainty in interbank markets when the source of the Knightian Uncertainty is incomplete information on banks’ risk exposures. The main findings in the paper are: (1) When interbank loans are arranged in anonymous brokered, instead...

Economist Matthew Pritsker of the Board of Governors of the Federal Reserve System offers a theoretical view on how regulators can reduce uncertainty in the financial markets by improving the availability of information.

I present a fully-rational symmetric-information model of an IPO, and a dynamic imperfectly competitive model of trading in the IPO aftermarket. The model helps to explain IPO underpricing, underperformance, and why share allocations favor large institutional investors. In the model,...

The growing share of financial assets that are held and managed by large institutional investors whose desired trades move asset prices is at odds with the traditional competitive assumption that investors are small and take prices as given. This paper relaxes the traditional price-taking...