We study the motivations of traders in the interbank market around the 2007-09 subprime crisis. We develop a new methodology that reveals the underlying urgency to borrow overnight funds, which we call Trading Urgency. We find that the dispersion of beliefs (market Sidedness) and Trading Urgency...

Network analysis has become a key framework in financial economics in understanding how interconnectedness among market participants results in spillovers, amplifies or absorbs shocks, and creates other nonlinear effects that ultimately impact market health. In this paper, we propose a new...

We build a new asset pricing framework to study the effects of aggregate illiquidity on asset prices, volatilities and correlations. The Black-Scholes economy is obtained in our framework as the limiting case of perfectly liquid markets. The model is consistent with empirical studies on the...

We consider the modelling of volatility on closely related markets. Univariate fractional volatility (FIGARCH) models are now standard, as are multivariate GARCH models. In this paper we adopt a combination of the two methodologies. There is as yet little consensus on the methodology for testing...

We apply network analysis to trace patterns of information transmission in an electronic limit order market. If market orders or large executable limit orders are submitted by informed traders, then resulting star-shaped or diamond-shaped patterns ndash; or trading networks ndash; should be...

The recent financial crisis has focused attention on identifying and measuring systemic risk. In this paper, we propose a novel approach to estimate the portfolio composition of banks as function of daily interbank trades and stock returns. While banks’ assets are reported to regulators...

The volatility of aggregate economic activity in the United States decreased markedly in the mid eighties. The decrease involved several components of GDP and has been linked to a more stable economic environment, identified by smaller shocks and more effective policy, and a diverse set of...