Related papers: Information Structures in Stablecoin Markets
A probability model exhibits instability if small changes in a data outcome result in large, and often unanticipated, changes in probability. This instability is a property of the probability model, given by a distributional form and a…
Does greater connectivity enhance the value of public information? I study a networked beauty contest game where agents balance adaptation to the fundamental with local coordination. The analysis reveals a stark non-monotonicity: while…
The global markets provide enterprises with selling opportunities and challenges in stabilizing operational strategies. From the perspective of production management, it is important to improve the profitability of an enterprise by…
Stablecoins and central bank digital currencies are on the horizon in Asia, and in some cases have already arrived. This paper provides new analysis and a critique of the use case for both forms of digital currency. It provides time-varying…
This paper examines how regulatory interventions in high-frequency financial markets affect price discovery. We focus on Breaking news, where dynamic circuit breakers trigger trading halts immediately after the release of macroeconomic…
Recent literature highlights the advantages of implementing social rules via dynamic game forms. We characterize when truth-telling remains a dominant strategy in gradual mechanisms implementing strategy-proof social rules, where agents…
Information in the form of data, which can be stored and transferred between users, can be viewed as an intangible commodity, which can be traded in exchange for money. Determining the fair price at which a string of data should be traded…
Centralized monetary policy, leading to persistent inflation, is often inconsistent, untrustworthy, and unpredictable. Algorithmic stablecoins enabled by blockchain technology are promising in solving this problem. Algorithmic stablecoins…
Persistent financial frictions - including price volatility, constrained credit access, and supply chain inefficiencies - have long hindered productivity and welfare in the global agricultural sector. This paper provides a theoretical and…
Transparency is a fundamental requirement for decision making systems when these should be deployed in the real world. It is usually achieved by providing explanations of the system's behavior. A prominent and intuitive type of explanations…
This study provides a practical introduction to high-frequency trading in blockchain-based currency markets. These types of markets have some specific characteristics that differentiate them from the stock markets, such as a large number of…
In this paper we characterise the propensity of big capital investments to systematically deliver poor outcomes as "fragility," a notion suggested by Nassim Taleb. A thing or system that is easily harmed by randomness is fragile. We argue…
We study a model in which two players with opposing interests try to alter a status quo through instability-generating actions. We show that instability can be used to secure longer-term durable changes, even if it is costly to generate and…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
Three traits of decentralized finance are studied. First, the market impact function is derived for optimal-growth liquidity providers. For a standard random walk, the classic square-root impact is recovered. An extension is then derived to…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
This paper analyzes realized return behavior across a broad set of crypto assets by estimating heterogeneous exposures to idiosyncratic and systematic risk. A key challenge arises from the latent nature of broader economy-wide risk sources:…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
As financial instruments grow in complexity more and more information is neglected by risk optimization practices. This brings down a curtain of opacity on the origination of risk, that has been one of the main culprits in the 2007-2008…
Do vulnerabilities in Decentralized Finance (DeFi) destabilize traditional short-term funding markets? While the prevailing ``Contagion Hypothesis'' posits that stablecoin reserve liquidations may transmit distress to traditional markets…