Cryptocurrency exchange market structure is fragmented, since cryptocurrencies are fungible, but customers cannot move freely across cryptocurrency exchanges. We build a model where exchanges with captive customers are linked by arbitrageurs, showing that ``star-shaped'' equilibria can exist, in which arbitrageurs...

This paper studies how artificial intelligence (AI) affects the finance labor market when
humans and AI perform different tasks in investment projects, and workers earn agency
rents that grow with project size. We identify two key effects of AI improvement: A freeriding
effect...

We provide an economic model of the interaction between a Layer-1 (L1) blockchain and an associated Layer-2 (L2). Our main finding is that, even when the L1 blockchain features value-creating decentralized applications (dApps), there nevertheless exist realistic conditions such that...

We study bank capital requirements as a tool to address climate-related financial risks and evaluate whether a prudential mandate for bank regulators remains appropriate in the presence of carbon externalities. We show that a prudential mandate maximizes welfare if carbon...

This paper studies security design by bidders with dispersed information about a common-value investment opportunity. Among a broad set of securities, bidders offer debt financing—the flattest securities. A first reason is that debt mitigates bidders' exposure to the winner's curse....

Shocks to a bank’s ability to raise liquidity at short notice can trigger depositor panics. Why don’t banks take a more active role in managing these risks? We study contingent risk management (hedging) in a standard global-games model of a...