We present a model for the equilibrium movement of capital between asset markets that are distinguished only by the levels of capital invested in each. Investment in that market with the greatest amount of capital earns the lowest risk premium. Intermediaries optimally trade off the costs of...

This paper provides a mathematical foundation for independent random matching of a large population, as widely used in the economics literature. We consider both static and dynamic systems with random mutation, partial matching arising from search, and type changes induced by matching. Under...

Here, I present and discuss a "10-by-10-by-10" network-based approach to monitoring systemic financial risk. Under this approach, a regulator would analyze the exposures of a core group of systemically important financial firms to a list of stressful scenarios, say 10 in number. For each...

We calculate equilibria of dynamic double-auction markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and offers. Investors are segmented into groups that differ with respect to characteristics determining information...

With the introduction of the international accounting standards in Europe and dissemination of LDI (Liability Driven Investment) as a new investment standard, the investor demand for super-long end has been rising also in Japan. Under these circumstances, it is required that the Japanese...

In these excerpts from "The Squam Lake Report", fifteen distinguished economists analyze where the global financial system failed, and how such failures might be prevented (or at least their damage better contained) in the future. Although there were many contributing factors to the...

I describe asset price dynamics caused by the slow movement of investment capital to trading opportunities. The pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal. The amplitude of the immediate price...