This paper addresses the issue of the optimal behaviour of the Lender of Last Resort (LOLR) in its microeconomic role regarding individual financial institutions in distress. It has been argued that the LOLR should not intervene at the microeconomic level and let any defaulting institution face...

We analyse the trade characteristics and market conditions which determine the market share of an electronic order book at the London Stock Exchange, where an upstairs¶ network of dual-capacity firms is also available for trade.  We hypothesise and empirically verify that execution and...

This paper studies how investors react to public messages that may be optimistically biased. We first construct a communication game between an investor and a (possibly) biased securities analyst. We find an equilibrium characterised by the following properties: first, the investor reacts more...

This paper presents a first step towards a new theory of housing market fluctuations. We develop a life-cycle model where agents face credit constraints and their housing consumption is restricted to a discrete set of possibilities. The market interaction of young credit constrained agents...

We propose a semiparametric single-factor di.usion model for the term structure of interest rate. The This model is highly flexible and encompasses most parametric single-factor models proposed in the literature. We fit the semiparametric model to a proxy of the Eurodollar short term interst...

We remove the aggregate US-wide component in US state level disposable income and consumption and find that state-specific consumption exhibits substantially less excess sensitivity to lagged state-specific disposable income than if the aggregate component is not controlled for. This is evidence...

A substantial literature addresses the negative effect on welfare of the release of information in a competitive market economy. We show that the value of information in this setting is typically positive if asset markets are sufficiently incomplete. More specifically, for any competitive...

Equilibrium credit rationing in the sense of Stiglitz and Weiss (1981) implies the marginal cost of funds to the borrower is infinite. So borrowers have an overwhelming incentive to cut their loan by a dollar and thereby avoiding being rationed. Ways of doing this include scaling down the...

Within an asymmetric information set-up in which individuals differ in terms of their risk aversion and can choose whether or not to take preventative action, we illustrate in a unified framework the equilibrium possibilities with stand-alone long-term care insuranceand annuity contracts. With...