I develop a theory of financial intermediation to explore how the availability of trading opportunities affects the link between the liquidity of financial institutions and their default decisions. In it, banks hedge against liquidity shocks either in the interbank market or by using a costly...

How does the presence of decentralized market-based channels for borrowing and lending affect financial integration and financial contagion? To answer this question, I develop a two-country model of financial intermediation, where banks have access to country-specific investment technologies,...

We propose a novel theory of banks' liquidity management and financial fragility. Banks hold liquidity and an illiquid productive asset, thereby engaging in maturity transformation, and insure their depositors against idiosyncratic and aggregate shocks. However, strategic complementarities in...

Does the level of deposits matter for bank fragility and efficiency? In a banking model with endogenous bank runs and a consumption-saving decision, we show that the level of deposits has opposite effects on bank fragility depending on the nature of bank runs. In an economy with panic-driven...

How does the presence of decentralized market-based liquidity channels affect financial liberalization and contagion? In order to answer this question, I extend the Diamond and Dybvig (1983) model of financial intermediation to a two-country environment, in which banks in each country enjoy a...

We study how regulation shapes the interaction between financial fragility and bank liquidity management and propose a rationale for the complementarity between bank recovery and resolution planning. To this end, we analyze an economy in which a benevolent resolution authority sets a bank...

How important is it to distinguish relative risk aversion (RRA) from the intertemporal elasticity of substitution (IES) to study banks' provision of liquidity insurance and the effectiveness of deposit freezes against depositors' panic runs? To answer these questions, I develop a Diamond-Dybvig...