An entrepreneur with limited liability needs to finance an infinite horizon investment project. An agency problem arises because she can divert operating cash flows before reporting them to the financiers. We first study the optimal contract in discrete time. This contract can be implemented by...

We analyse the optimal Initial Public Offering (IPO) mechanism in a multidimensional adverse selection setting where institutional investors have private information about the market valuation of the shares, the intermediary has private information about the demand, and the institutional...

The canonical selection contracting programme takes the agent's participation decision as deterministic and finds the optimal contract, typically satisfying this constraint for the worst type. Upon weakening this assumption of known reservation values by introducing independent randomness into...

This paper develops a model of sovereign debt where governments are myopic. Instead of focusing on the incentives to repay, as in most of the theoretical literature on the topic (which assumes implicitly that governments have long-term objectives), I therefore consider that governments always...

We study a continuous-time principal-agent model in which a risk-neutral agent with limited liability must exert unobservable effort to reduce the likelihood of large but relatively infrequent losses. Firm size can be decreased at no cost or increased subject to adjustment costs. In the optimal...

The classical doctrine of the Lender of Last Resort, elaborated by Thornton (1802) and Bagehot (1873), asserts that the Central Bank should lend to ?illiquid but solvent? banks under certain conditions. Several authors have argued that this view is now obsolete: when interbank markets are...