Research
Publications
Strategic Arbitrage in Segmented Markets (with Svetlana Bryzgalova and Taisiya Sikorskaya), 2024.
Accepted for publication in the Journal of Financial Economics.
We study arbitrage in a repeated game framework with multiple arbitrage opportunities. Arbitrageurs do not step on each other's toes and specialize in the arbitrage opportunities they exploit. This is a tacit collusion equilibrium. Our empirical analysis provides evidence from the U.S. options market consistent with our theory.
A part of this paper was previously circulated under the title, "Profiting from Investor Mistakes: Evidence from Suboptimal Option Exercise.''
Best Paper Award at the 2023 Colorado Finance Summit
Retail Trading in Options and the Rise of the Big Three Wholesalers (with Svetlana Bryzgalova and Taisiya Sikorskaya), 2023, Journal of Finance, 78(6), 3465–3514. Solicited by the Journal of Finance. Available in Open Access.
Media coverage: The Economist, Bloomberg
Is there Too Much Benchmarking in Asset Management? (with Anil Kashyap, Natalia Kovrijnykh and Jian Li), 2023, American Economic Review, 113(4), 1112–1141.
Equilibrium consequences of fund managers’ compensation contracts include crowded trades, excessive benchmarking and excessive asset management costs. Through their use of benchmarks, fund investors impose externalities on each other. Socially optimal contracts diverge from privately optimal ones.
Benchmarking Intensity (with Taisiya Sikorskaya), 2023, The Review of Financial Studies, 36(3), pp. 859–903. Available in Open Access. Editor's Choice.
The Benchmark Inclusion Subsidy, 2021, Journal of Financial Economics, 142(2), pp. 756-774. (With Anil Kashyap, Natalia Kovrijnykh and Jian Li.)
Firms included in popular benchmarks are effectively subsidized by asset managers. This “subsidy” comes from the inelastic demand of fund managers for stocks in their benchmark and it works through the cost of capital. A non-technical summary and media coverage: VoxEU, LBSR, Barron’s
A Model of Financialization of Commodities, 2016, Journal of Finance, 71(4), pp. 1511-1556. (With Suleyman Basak.)
Asset Prices and Institutional Investors, 2013, American Economic Review, 103, pp. 1728-1758. (With Suleyman Basak.) Online Appendix.
An Asset-Pricing View of External Adjustment, 2010, Journal of International Economics, 80, pp. 144-156. (With Roberto Rigobon.) Supplementary Appendix.
The Role of Portfolio Constraints in the International Propagation of Shocks, 2008, Review of Economic Studies, 75, pp.1215-1256. (With Roberto Rigobon.) This paper was previously circulated under the title "Wealth Transfers, Contagion and Portfolio Constraints," NBER working paper No. 11440 and CEPR discussion paper No. 5117.
Multiplicity in General Financial Equilibrium with Portfolio Constraints, 2008, Journal of Economic Theory, 142, pp. 100-127. (With Suleyman Basak, David Cass, and Juan Manuel Licari.)
Offsetting the Implicit Incentives: Benefits of Benchmarking in Money Management, 2008, Journal of Banking and Finance, 32(9), pp. 1883-1893. (With Suleyman Basak and Alex Shapiro.) Awarded a London Business School Centre for Corporate Governance research grant, May 2007.
Optimal Asset Allocation and Risk Shifting in Money Management, 2007, Review of Financial Studies, 20(5), pp. 1583-1621. (With Suleyman Basak and Alex Shapiro.) Winner, Institute for Quantitative Research in Finance (Q Group) project funding award, 2003.
Asset Prices and Exchange Rates, 2007, Review of Financial Studies, 20(4), pp. 1139-1181. (With Roberto Rigobon.) This paper was previously circulated as NBER working paper No. 9834.
On Trees and Logs, 2004, Journal of Economic Theory, 116, pp. 41-83. (With David Cass.)
Monopoly Power and the Firm’s Valuation: A Dynamic Analysis of Short versus Long-Term Policies, 2004, Economic Theory, 24, pp. 503-530. (With Suleyman Basak.) This paper was previously circulated as CEPR discussion paper No. 3425.
Longer version reprinted in: Essays in Dynamic General Equilibrium Theory: Festschrift for David Cass, 2005, pp. 1-34, Studies in Economic Theory, vol. 20. Heidelberg and New York: Springer.
Book Chapters
International Macro-Finance, 2013, in: Gerard Caprio (ed.) Handbook of Safeguarding Global Financial Stability: Political, Social, Cultural, and Economic Theories and Models, Vol. 2, pp. 169-176, Oxford: Elsevier Inc. (With Roberto Rigobon.)
Working Papers
International Capital Markets and Wealth Transfers (with Magnus Dahlquist, Christian Heyerdahl-Larsen and Julien Penasse), 2023. Best Paper Award at the Vienna Symposium on Foreign Exchange Markets 2022
ESG Confusion and Stock Returns: Tackling the Problem of Noise (with Florian Berg, Julian Koelbel and Roberto Rigobon), 2022. People's Choice award at the 2022 ARCS meetings.
Equilibrium Portfolios and External Adjustment under Incomplete Markets. (With Roberto Rigobon.) 2015.
Structural Estimation of Systemic Risk: Measuring Contagion in the Sub-Prime Crisis. (With Pavitra Kumar and Roberto Rigobon.) 2014.
A Dynamic Model with Import Quota Constraints. (With Suleyman Basak.) 2010.
Offsetting the Incentives: Risk Shifting and Benefits of Benchmarking in Money Management. (With Suleyman Basak and Alex Shapiro.) 2004. (An old working paper version, CEPR discussion paper No. 5006. Parts of this work are used in "Optimal Asset Allocation and Risk Shifting in Money Management" published in the RFS, and "Offsetting the Incentives: Benefits of Benchmarking in Money Management," published in the JBF.)
Adjustment Costs, Learning-by-Doing, and Technology Adoption under Uncertainty. 2002.
Work in Progress
Swing Pricing (with Anil Kashyap, Natalia Kovrijnykh and Jian Li)
Designing Sustainable Benchmarks (with Anil Kashyap and Natalia Kovrijnykh)
Prices in Incentive Constraints (with Anil Kashyap, Natalia Kovrijnykh and Jian Li)