Related papers: Bailout Stigma
We analyze cascades of defaults in an interbank loan market. The novel feature of this study is that the network structure and the size distribution of banks are derived from empirical data. We find that the ability of a defaulted…
The waiting time needed for a stock market index to undergo a given percentage change in its value is found to have an up-down asymmetry, which, surprisingly, is not observed for the individual stocks composing that index. To explain this,…
As malware, exploits, and cyber-attacks advance over time, so do the mitigation techniques available to the user. However, while attackers often abandon one form of exploitation in favor of a more lucrative one, mitigation techniques are…
We introduce a model for a market based economic system of cyber-risk valuation to correct fundamental problems of incentives within the information technology and information processing industries. We assess the makeup of the current day…
We study a dynamic labor market in which a risk-averse worker with career concerns chooses each period between self-employment, which generates publicly observed binary output, and employment at a firm, which pays a flat wage but keeps…
We study the problem of allocating bailouts (stimulus, subsidy allocations) to people participating in a financial network subject to income shocks. We build on the financial clearing framework of Eisenberg and Noe that allows the…
Costly pre-play messages can deter unnecessary wars - but the same messages can also entrench stalemates once violence begins. We develop an overlapping-generations model of a security dilemma with persistent group types (normal vs bad),…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
The current public sense of anxiety in dealing with disinformation as manifested by so-called fake news is acutely displayed by the reaction to recent events prompted by a belief in conspiracies among certain groups. A model to deal with…
Financial market resilience reflects the ability of a financial market to withstand external shocks and to recover from them, while its measurement has yet to be standardized. Accordingly, this paper quantifies the adaptability and…
I examine global dynamics in a monetary model with overlapping generations of finite-horizon agents and a binding lower bound on nominal interest rates. Debt targeting rules exacerbate the possibility of self-fulfilling liquidity traps, for…
Feedback optimization has emerged as an effective strategy for steady-state optimization of dynamical systems. By exploiting models of the steady-state input-output sensitivity, methods of this type are often sample efficient, and their use…
Experiments on online marketplaces and social networks suffer from interference, where the outcome of a unit is impacted by the treatment status of other units. We propose a framework for modeling interference using a ubiquitous deployment…
I develop and estimate a dynamic equilibrium model of risky entrepreneurs' borrowing and savings decisions incorporating both formal and local-informal credit markets. Households have access to an exogenous formal credit market and to an…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
A principal with cheap capital optimally forces her counterparty to borrow at above-market rates. The reason: the form of finance is a screening device. Advances provide liquidity but pool types; contingent transfers separate types, but,…
We develop a novel two-layer approach for optimising mortgage relief products through a simulated multi-agent mortgage environment. While the approach is generic, here the environment is calibrated to the US mortgage market based on…
Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk…
We employ a natural method from the perspective of the optimal stopping theory to analyze entry-exit decisions with implementation delay of a project, and provide closed expressions for optimal entry decision times, optimal exit decision…
Firms compete for clients, creating distributions of market shares ranging from domination by a few giant companies to markets in which there are many small firms. These market structures evolve in time, and may remain stable for many years…