The authors study a simple model of an asset market with informed and non-informed agents. In the absence of non-informed agents, the market becomes information efficient when the number of traders with different private information is large enough. Upon introducing non-informed agents, the...

The breakdown of short-term funding markets was a key feature of the global financial crisis of 2007/8. Combining insights from the literature on global games and network growth, we develop a simple model that sheds light on how network topology interacts with the funding structure of financial...

I study the limit of a large random economy, in the ideal case of perfect competition, where full information is available to all market participants, and where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This provides a...

In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete.We show that techniques such as Maximum Entropy currently used to reconstruct credit networks severely underestimate the risk of...

Large deviations for fat tailed distributions, i.e. those that decay slower than exponential, are not only relatively likely, but they also occur in a rather peculiar way where a finite fraction of the whole sample deviation is concentrated on a single variable. The regime of large deviations is...