We present an overlapping generations model with spatial separation and agents who face unsystematic liquidity risk. In a pure exchange economy, agents engage in life cycle portfolio rebalancing. In an intermediated economy, intergenerational banks or mutual funds cater to diversified clienteles...

We analyze an overlapping generations economy where agents interact to share liquidity risk. We show that a pure exchange economy has excessive trade in equilibrium, and that intergenerational financial intermediaries reduce the number of interactions by catering to clienteles with uncorrelated...

We compare the call auction mechanisms of two major European stock exchanges. The French Euronext auctions disclose five levels of limit orders and have fixed ending times. The German Xetra auctions only disclose the virtual clearing price and volume, and have random ending times. For a sample...

Continuously monitored down-and-out calls and up-and-out puts have become very popular during the last decade, mainly because they can be interpreted as simple leveraged positions. Their deltas stay close to unity and their Greeks are small, particularly in low interest rate environments....