Related papers: The Screening Cost of Liquidity
Sir, We write as senior scientists about a problem vital to the scientific enterprise and prosperity. Nowadays, funding is a lengthy and complex business. First, universities themselves must approve all proposals for submission. Funding…
The basic financial purpose of an enterprise is maximization of its value. Trade credit management should also contribute to realization of this fundamental aim. Many of the current asset management models that are found in financial…
Liberalized electricity markets often include resource adequacy mechanisms that require consumers to contract with generation resources well in advance of real-time operations. While administratively defined mechanisms have most commonly…
A principal and an agent can launch a project under unanimous consent. Their individual payoffs from the project depend on an underlying state, and the agent privately knows his own preference. The principal can conduct a test to learn…
We consider the classic principal-agent model of contract theory, in which a principal designs an outcome-dependent compensation scheme to incentivize an agent to take a costly and unobservable action. When all of the model…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
A model is developed to assess the profitability of loans or mortgages with a specified repayment schedule. Financial institutions face two competing risks: default and prepayment, both influenced by the stochastic evolution of credit…
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…
Standard procurement models assume that the buyer knows the quality of the good at the time of procurement; however, in many settings, the quality is learned only long after the transaction. We study procurement problems in which the…
This paper studies a setting in which multiple suppliers compete for a buyer's procurement business. The buyer faces uncertain demand and there is a requirement to reserve capacity in advance of knowing the demand. Each supplier has costs…
The implementation of a supervision and incentive process for identical workers may lead to wage variance that stems from employer and employee optimization. The harder it is to assess the nature of the labor output, the more important such…
We consider a fundamental dynamic allocation problem motivated by the problem of $\textit{securities lending}$ in financial markets, the mechanism underlying the short selling of stocks. A lender would like to distribute a finite number of…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
An employer contracts with a worker to incentivize efforts whose productivity depends on ability; the worker then enters a market that pays him contingent on ability evaluation. With non-additive monitoring technology, the interdependence…
Securities borrowing and lending are critical to proper functioning of securities markets. To alleviate securities owners' exposure to borrower default risk, overcollateralization and indemnification are provided by the borrower and the…
Consider a cost-sharing game with players of different contribution to the total cost: an example might be an insurance company calculating premiums for a population of mixed-risk individuals. Two natural and competing notions of fairness…
Sequential fundraising in two sided online platforms enable peer to peer lending by sequentially bringing potential contributors, each of whose decisions impact other contributors in the market. However, understanding the dynamics of…
This paper derives a model of screening contracts in the presence of positive network effects when building an electronic commerce network (e-commerce) between a large firm and a small and medium sized enterprise (SME) supplier based on…
We investigate the optimal execution of contracts that are used in merger\&acquisition deals. We consider cash-settled and physically delivered contracts between a broker and a counterpart. Contracts are linear (total returns swaps),…
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory…