Related papers: The Screening Cost of Liquidity

Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if…

We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…

We propose an empirical method to analyze data from first-price procurements where bidders are asymmetric in their risk-aversion (CRRA) coefficients and distributions of private costs. Our Bayesian approach evaluates the likelihood by…

This paper studies the problem of procuring diverse resources in a forward market to cover a set $\bf{E}$ of uncertain demand signals $\bf{e}$. We consider two scenarios: (a) $\bf{e}$ is revealed all at once by an oracle (b) $\bf{e}$…

We study market-consistent valuation of liability cash flows motivated by current regulatory frameworks for the insurance industry. Building on the theory on multiple-prior optimal stopping we propose a valuation functional with sound…

Consumers only discover at the first seller which product best fits their needs, then check its price online, then decide on buying. Switching sellers is costly. Equilibrium prices fall in the switching cost, eventually to the monopoly…

This study introduces a new technique to recover the implicit discount factor in the derivative market using only European put and call prices: this discount is grounded in actual transactions in active markets. Moreover, this study…

We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…

We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…

I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…

We study markets where firms compete for consumer attention by subsidizing costly product inspection. These subsidies do not change product quality, but they alter the order in which consumers search by lowering inspection costs. We…

It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…

We study a continuous time contracting model in which a principal hires a risk averse agent to manage a project over a finite horizon and provides sequential payments whose timing is endogenously determined. The resulting nonzero-sum…

I study multidimensional sequential screening. A monopolist contracts with a buyer who privately observes information about the distribution of their eventual valuations for multiple goods. After initial private information is reported and…

Motivated by school admissions, this paper studies screening in a population with both advantaged and disadvantaged agents. A school is interested in admitting the most skilled students, but relies on imperfect test scores that reflect both…

A mean-reverting financial instrument is optimally traded by buying it when it is sufficiently below the estimated `mean level' and selling it when it is above. In the presence of linear transaction costs, a large amount of value is paid…

The research presented in this work is motivated by some recent papers regarding hedging and valuation of financial securities subject to funding costs, collateralization and counterparty credit risk. Our goal is to provide a sound…

We study the design of an auction for an income-generating asset such as an intellectual property license. Each bidder has a signal about his future income from acquiring the asset. After the asset is allocated, the winner's income from the…

Financial networks are characterized by complex structures of mutual obligations. These obligations are fulfilled entirely or in part (when defaults occur) via a mechanism called clearing, which determines a set of payments that settle the…

We consider a setting in which a group of agents share resources that must be allocated among them in each discrete time period. Agents have time-varying demands and derive constant marginal utility from each unit of resource received up to…