We study trade between an informed seller and an uninformed buyer who have existing inventories of assets similar to those being traded. We show that these inventories may induce the buyer to increase the price (a "run-up") but may also make trade impossible (a "freeze") and hamper information...

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

Most analyses of the financial crisis of 2007-2008 assign a large causal role to inflated credit ratings. The ratings flaw most directly implicated in the crisis involved “second-level” mortgage securitizations: individual mortgages were pooled and securities sold against them, and some of...