Sabine Yoffou, Moral Hazard and adverse selection in markets for credit risk transfer, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2011. (Master's Thesis)
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Beinan (Nancy) Ye, Recent Developments in the Study and Regulation of Repo Markets, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2011. (Master's Thesis)
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Sabine Yoffou, Moral hazard and adverse selection in markets for credit risk and transfer, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2011. (Master's Thesis)
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Lynn Schetgen, Kreditrationierung - Ein Überblick, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2011. (Bachelor's Thesis)
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Christian Ewerhart, Rent-seeking contests with independent private values, In: Working paper series / Institute for Empirical Research in Economics, No. No. 490, 2010. (Working Paper)
We consider symmetric rent-seeking contests with independent private valuations of the contest prize. For a two-parameter specification with continuous types, we fully characterize the Bayesian equilibrium, and study its basic properties. The willingness to waste is a hump-shaped function of the private valuation, with the median type expending the highest share of her valuation. A first-order (second-order) stochastic increase in the common type distribution raises (lowers) ex-ante expected efforts. However, neither first-order nor second-order stochastic dominance in valuations necessarily leads to a first-order stochastic dominance ranking in efforts. We also show that, as uncertainty vanishes, the Bayesian equilibrium converges to the Nash equilibrium of the model with complete information. |
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Robertas Zubrickas, Optimal Grading, In: Working paper series / Institute for Empirical Research in Economics, No. No. 487, 2010. (Working Paper)
Assuming that teachers are concerned with human capital formation and students - with ability signaling, in this paper we model a teacher-student relationship as an agency problem with conflicting interests. In our model, the teacher elicits effort from the student rewarding for it with a grade, the utility of which to the student is an ability signal inferred by the job market. In the event that the job market does not observe individual teachers' grading practice, teachers find grades as costless rewards and optimally choose to be lenient in grading. As a result, 'the problem of the commons' of good grades emerges leading to the depreciation of grading standards and grade inflation. The prediction of the model that the lower the expectations the teacher holds about her students' abilities, the flatter the grading rules she sets up is empirically supported. |
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Robertas Zubrickas, How Exposure to Markets Can Favor Inequity-Averse Preferences, In: Working paper series / Institute for Empirical Research in Economics, No. No. 473, 2010. (Working Paper)
This paper shows how non-individualistic preferences can be individual fitness maximizing in the presence of general equilibrium externalities. In the model, individuals share an endowment, which can be consumed on its own and/or used as a means of exchange to purchase goods from merchants on the external market if such exists. Assuming that increased consumption means increased individual fitness, we show that inequity-averse behavior with respect to endowment distribution can benan optimal response to merchants' price discrimination and lead to the evolution ofninequity-averse preferences. The findings presented here are supported by empirical evidence on the endogeniety of people's preferences with respect to exposure to market exchange. |
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Christian Ewerhart, Monotone comparative statics with separable objective functions, In: Working paper series / Institute for Empirical Research in Economics, No. No. 472, 2010. (Working Paper)
The sum of a supermodular function, assumed nondecreasing in the choice variable, and of a 'concavely supermodularizable' function, assumed nonincreasing in the parameter variable, satisfies the Milgrom-Shannon (1994, Monotone comparative statics, Econometrica 62, 157-180) single crossing condition. As an application, I prove existence of a pure strategy Nash equilibrium in a Cournot duopoly with logconcave demand, affiliated types, and nondecreasing costs. |
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Christian Ewerhart, Monotone comparative statics with separable objective functions, Economics Bulletin, Vol. 30 (3), 2010. (Journal Article)
The Milgrom-Shannon single crossing property is essential for monotone comparative statics of optimization problems and noncooperative games. This paper formulates conditions for an additively separable objective function to satisfy the single crossing property. One component of the objective function is assumed to allow a monotone concave transformation with increasing differences, and to be nondecreasing in the parameter variable. The other component is assumed to exhibit increasing differences, and to be nonincreasing in the choice variable. As an application, I prove existence of an isotone pure strategy Nash equilibrium in a Cournot duopoly with logconcave demand, affiliated types, and nondecreasing costs. |
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Christian Ewerhart, Nuno Cassola, Natacha Valla, Declining valuations and equilibrium bidding in central bank refinancing operations, International Journal of Industrial Organization, Vol. 28 (1), 2010. (Journal Article)
Among the most puzzling observations on the euro money market are the discount in the weekly refinancing operations, the more aggressive bidding under uncertainty, the temporary flatness of bid schedules, and the development of interest rate spreads. To explain these observations, we consider a standard divisible-good auction with either uniform or discriminatory pricing, and place it in the context of a secondary market for interbank credit. The analysis links the empirical evidence to the endogenous choice of collateral in credit transactions. We also discuss the Eurosystem's preference for the discriminatory auction, the remuneration of reserves, and the impact of the recent market turmoil. |
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Christian Ewerhart, Patricia Feubli, Lemons and Money Markets, In: Working paper series / Institute for Empirical Research in Economics, No. No. 455, 2009. (Working Paper)
This paper identifies simple conditions for monotone comparative statics of a unique equilibrium in the Akerlof-Wilson model. Separate conditions apply to trade volume and price. Trade volume increases when supply becomes both stronger and more elastic. In contrast, price decreases when supply becomes both stronger and less elastic. An application to the interbank market suggests surprisingly specific measures to address elevated term rates and market breakdown. |
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Christian Ewerhart, Cournot Oligopoly and Concavo-Concave Demand, In: Working paper series / Institute for Empirical Research in Economics, No. No. 427, 2009. (Working Paper)
The N-firm Cournot model with general technologies is reviewed to derive generalized and unified conditions for existence of a pure strategy Nash equilibrium. Tight conditions are formulated alternatively (i) in terms of concavity of two-sided transforms of inverse demand, or (ii) as linear constraintsnon the elasticities of inverse demand and its first derivative. These conditions hold, in particular, if a firm’s marginal revenue decreases in other firms’ aggregate output, or if inverse demand is logconcave. The analysis relies on lattice-theoretic methods, engaging both cardinal and ordinal notions of supermodularity. As a byproduct, a powerful test for strict quasiconcavitynis obtained. |
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Christian Ewerhart, Nuno Cassola, Steen Ejerskov, Natacha Valla, Optimal allotment policy in central bank open market operations, The European journal of finance, Vol. 15 (4), 2009. (Journal Article)
This paper derives a central bank's optimal liquidity supply towards a money market with an unrestricted lending facility. We show that when the effect of liquidity on market rates is not too small, and the monetary authority cares for both interest rates and liquidity conditions, then the optimal allotment policy may entail a discontinuous
reaction to initial conditions. In particular, the model predicts a threshold level of liquidity below which the central bank will not bail out the banking system. An
estimation of the liquidity effect for the euro area suggests that the discontinuity might have contributed to the Eurosystem's tight response to occurrences of underbidding during the period June 2000 through March 2004. |
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Artashes Karapetyan, Two essays on information sharing, one essay on housing markets, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2009. (Dissertation)
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Christian Ewerhart, Natacha Valla, Liquidité des marchés financiers et prêteur en dernier ressort, Revue de la stabilité financière / Financial Stability Review (11; Nu), 2008. (Journal Article)
À l’été 2007, les problèmes liés à la dette subprime aux États-Unis ont entraîné des perturbations sur de nombreux segments du système financier, en particulier sur les marchés monétaires interbancaires, obligeant les banques centrales américaine et européenne à intervenir à maintes reprises afin de rétablir un bon fonctionnement. Cet article examine les circonstances dans lesquelles une pénurie de liquidité peut apparaître et évalue différentes possibilités qui s’offrent au prêteur en dernier ressort pour restaurer la stabilité financière. Il montre également que l’évaluation des risques des entités financières à levier financier ne doit pas reposer uniquement sur les données de bilan, mais prendre aussi en compte, de manière
explicite, les sûretés, l’illiquidité et l’indisponibilité potentielle des prix du marché.
Nous en tirons principalement deux conclusions. Premièrement, nous établissons une hiérarchie claire entre les instruments de politique. D’après la relation entre risque et efficience, les injections de liquidité ciblées (facilités d’urgence) sont à privilégier. En effet, lorsque la liquidité est utilisée dans un but spéculatif en période de crise, les opérations d’open market non discriminatoires risquent d’attirer des participants manquant de fonds, qui peuvent détourner la monnaie centrale et en priver ceux qui en ont le plus besoin. Les injections de liquidité ciblées deviennent alors strictement préférables.
Deuxièmement, à notre avis, les cessions forcées d’actifs peuvent perturber les marchés dans le cas où les investisseurs ont un levier financier élevé. Compte non tenu du financement externe et de la renégociabilité des contrats de prêt, si un investisseur au levier total est touché par un choc sur la liquidité, il sera contraint de se défaire d’une partie de ses actifs. Sur des marchés qui ne sont pas parfaitement liquides, ces liquidations induisent des baisses de prix, qui, en présence d’entraves à la gestion standard du risque, entraînent un réexamen des bilans évalués à la valeur de marché, des appels de marge et des cessions supplémentaires. Dans le pire des scénarios, l’investisseur à fort levier ne pourra peut-être pas faire face à toutes ces contractions de la liquidité et aux appels de marge dont elles s’accompagnent. Il en résulte alors un effondrement du marché des actifs illiquides, ce qui rend la valorisation de ces actifs relativement ambiguë. Pour l’investisseur, en raison de la rupture potentielle des échanges, le niveau des pertes
déclenchant le défaut opérationnel est probablement plus bas que celui donné par les mesures standard du risque. |
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Christian Ewerhart, N Valla, Financial Market Liquidity and the Lender of Last Resort, Financial Stability Review - Special Issue on Liquidity, 2008. (Journal Article)
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Christian Ewerhart, Relative Performance in Bilateral Trade, In: Working paper series / Institute for Empirical Research in Economics, No. No. 327, 2007. (Working Paper)
Concerns for relative performance are integrated into a model of contractual renegotiation in bilateral trade. It is shown that concernsnfor relative performance do never impede efficient trade. Moreover, conditional on renegotiation to occur, concerns for relative performance tend to mitigate material rent expropriation. However, concerns for relative performance make the occurrence of renegotiation more likely, and may thereby lead to underinvestment even in very optimistic environments. The analysis suggests an explanation for the occurrence of the Druzhba pipeline conflictnbetween Russia and Belarus in January 2007. |
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Christian Ewerhart, Nuno Cassola, Steen Ejerskov, Natacha Valla, Manipulation in money markets, International Journal of Central Banking, Vol. 3 (1), 2007. (Journal Article)
Interest rate derivatives are among the most actively traded financial instruments in the main currency areas. With values of positions reacting immediately to the underlying index of daily interbank rates, manipulation has become an increasing challenge for the operational implementation of monetary policy. To address this issue, we study a microstructure model in which a commercial bank may have strategic recourse to central bank standing facilities. We characterise an equilibrium in which market rates will be manipulated with strictly positive probability. Our findings have an immediate bearing on recent developments in the Sterling and Euro money markets. |
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Christian Ewerhart, Discussion of "The Interplay between Money Market Development and Changes in Monetary Policy Operations in Small European Countries, 1980-2000" by Jens Forssbæck and Lars Oxelheim, In: Open Market Operations and Financial Markets, Routledge International Studies in Money and Banking, London, p. 153 - 156, 2007. (Book Chapter)
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Nuno Cassola, Claudio Morana, Structural Economic Approach to Bidding in the Main Refinancing Operations of the Eurosystem , Journal of Financial Transformation (issue on Monetary Union), Vol. 19, 2007. (Journal Article)
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