Cyber attacks can impair banks operations and precipitate bank runs. When digital infrastructure is shared, banks defend themselves by investing in cybersecurity but can free-ride on the security measures of others. Ex ante free-riding by banks interacts with the ex post coordination frictions...

We examine the safety of government bonds in the presence of Knightian uncertainty amongst financial market participants. In our model, the information insensitivity of government bonds is driven by strategic complementarities across counterparties and the structure of trading relationships. We...

Why do politicians sometimes pursue policies with uncertain outcomes? We present a model in which politicians are unable to pre-commit to a status quo policy, and where investors and voters face a conflict over the division of output. Politicians may deviate from the status quo and pursue risky...

We offer an analytical framework for studying "pre-emptive" debt exchanges. Countries can tailor a sovereign bankruptcy framework by choosing provisions (or "haircuts") ex ante, but must contend with the market discipline of holdout litigation ex post. Secondary markets play a role in shaping...