Papers
FinTech Disruption, Payment Data, and Bank Information
Uploaded: Feb 6, 2019
We study the impact of FinTech competition on a monopolist bank that bundles payment processing and lending. In our model, consumers' payment data contain information about their credit quality. This information is valuable to the bank when making loans. Surprisingly,...
A Theory of Liquidity in Private Equity
Uploaded: Feb 5, 2019
We propose a model of Private Equity (PE) investment that can rationalize several empirical findings about fundraising and returns. General partners (GPs) possess superior investment skills and raise capital from Limited Partners (LPs) to finance illiquid projects within funds. The...
A Theory of Participation in OTC and Centralized Markets
Uploaded: Feb 1, 2019
Should regulators encourage the migration of trade from over-the-counter (OTC) to centralized markets? To address this question, we consider a model of equilibrium and socially optimal market participation of heterogeneous banks in an OTC market, in a centralized market, or...
Inventory Management, Dealers' Connections, and Prices in OTC Markets
Uploaded: Feb 1, 2019
We propose a new model of interdealer trading. Dealers trade together to reduce their inventory holding costs. Core dealers share these costs efficiently and provide liquidity to peripheral dealers, who have heterogeneous access to core dealers. We derive predictions about...
Asymmetric Information and Security Design under Knightian Uncertainty
Uploaded: Feb 1, 2019
We study a signaling game in which an issuer with private information about the distribution of the project’s cash flows designs a security to sell to an uninformed investor to raise financing for the project. The investor faces Knightian uncertainty...
Learning in Financial Markets: Implications for Debt-Equity Conflicts
Uploaded: Feb 1, 2019
Despite the empirical prevalence of debt overhang, existing research has found little evidence of risk-shifting. To understand this discrepancy, we augment a traditional feedback model with an important feature: investors’ endogenous learning. We show that more ex-ante inefficient opportunities for...
