We provide a model-free framework to study the global factor structure of exchange rates. To this end, we propose a new methodology to estimate international stochastic discount factors (SDFs) that jointly price cross-sections of international assets, such as stocks, bonds, and currencies, in...

We develop a general equilibrium model of banks' capital structure, featuring heterogeneous portfolio risk and an imperfectly elastic supply of bank equity stemming from financial market segmentation. In our model, equity is costly and serves as a buffer against insolvency. Banks are ex-ante...

We investigate the channel through which fluctuations in the market liquidity of real-sector repo collateral cause arbitrage crashes and failure of systemically important intermediaries during the global financial crisis. Intermediaries pledge productive capital as repo collateral to fund the...

We study banks' optimal equity buffer in general equilibrium and their response to under-capitalization. Making progress towards a "pecking order theory" for private recapitalizations, our benchmark model identifies equity issuance as individually and socially optimal, compared to deleveraging,...