Should regulators reveal the models they use to stress test banks? In our setting, revealing leads to gaming, but secrecy can induce banks to underinvest in socially desirable assets for fear of failing the test. We show that although the...

We propose a model of strategic debt renegotiation in which businesses are sequentially interconnected through their liabilities. This financing structure, which we refer to as a debt chain, gives rise to externalities, as a lender's willingness to provide concessions to...

Should regulators encourage the migration of trade from over-the-counter (OTC) to centralized markets? To address this question, we study a model in which banks make costly decisions to participate in an OTC market, a centralized market, or both markets at...

I build a search model of bond and credit default swap (CDS) markets with endogenous investor participation and show that shorting bonds through CDS increases the liquidity and price of bonds. By allowing investors to trade the credit risk of...

This paper studies a search-based model of OTC markets in which clients with heterogenous trading needs direct their trades to one of ex-ante identical dealers. The main insight of the paper is that the way clients sort across dealers shapes...

We study the determinants of asset market fragmentation in a model with strategic investors that disagree about the value of an asset. Investors’ choices determine the market structure. Fragmented markets are supported in equilibrium when disagreement between investors is low....