We provide a pricing theory for emerging asset classes, like emerging markets, that are not yet mature enough to be attractive to the general public. We show how leverage cycles can cause contagion, f!ight to collateral, and issuance rationing in a frequently recurring phase we call the anxious...

We show that very little is needed to create liquidity under-supply in equilibrium. Credit constraints on demand by themselves can cause an under-supply of liquidity, without the uncertainty, intermediation, asymmetric information or complicated international financial framework used in other...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...

We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how leverage tends to boost asset prices and create bubbles. We show how leverage can be endogenously determined in equilibrium and how it depends on volatility. We describe the...

Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...

Financial innovations that change how promises are collateralized can affect investment, even in the absence of any change in fundamentals. In C-models, the ability to leverage an asset always generates over-investment compared to Arrow Debreu. The introduction of CDS always leads to...

In June 2022, the Federal Reserve started reducing the size of its balance sheet, which had expanded to just under $9 trillion in response to the COVID-19 pandemic. However, whereas banks' reserves at the Federal Reserve have decreased, the investment of money market funds (MMFs) at the Federal...

We run an experiment where professional traders, endowed with private information, trade an asset over multiple periods. After the trading game, we gather information about the professional traders' characteristics by having them carry out a series of tasks. We study which of these...

Financial sanctions, alongside economic sanctions, are components of the toolkit used by governments as part of international diplomacy. The use of sanctions, especially financial, has increased over the last seventy years. Financial sanctions have been particularly important whenever the goals...

Stablecoins and money market funds both seek to provide investors with safe, money-like assets but are vulnerable to runs in times of stress. In this paper, we investigate similarities and differences between the two, comparing investor behavior during the stablecoin runs of 2022 and 2023 to...