This paper argues that banks must be sufficiently levered to have first-best incentives to make new risky loans. This result, which is at odds with the notion that leverage invariably leads to excessive risk taking, derives from two key premises that focus squarely on the role of banks as informed lenders. First, banks finance projects that they do not own, which implies that they cannot extrac...

We study the terms of credit in a competitive market in which sellers (lenders) are willing to repeatedly …nance the purchases of buyers (borrowers) by engaging in a credit relationship. The key frictions are: (i) the lender is unable to observe the borrower’s ability to repay a loan; (ii) the borrower cannot commit to any long-term contract; (iii) it is costly for the lender to contact a borro...

We show that the role of unsecured, short-term wholesale funding for global banks has changed significantly in post-financial-crisis regulatory environment. Global mainly use such to finance liquid, near risk-free arbitrage positions—in particular, interest on excess reserves and covered rate parity arbitrage. In this environment, we examine response a large negative shock as result U.S. money ...

The aim of this work is to model a jet diffusion flame, to show the corresponding proof of existence of solutions, and to present numerical results. The model is based on the flamelet equations for the chemistry and on the mixture fraction for the flow. Numerical tests are carried out for Sandia Flame D and the results are found to compare well with available data found in the literature.

We prove a general finite-dimensional reduction theorem for critical equations of scalar curvature type. Solutions of these equations are constructed as a sum of peaks. The use of this theorem reduces the proof of existence of multi-peak solutions to some test-functions estimates and to the analysis of the interactions of peaks.

Currently, Eurodollars and fed funds markets combined trade about $220 billion in funds daily, the vast majority of which with overnight tenor. In this paper, we document several features of these wholesale unsecured dollar funding markets. Using daily confidential data on wholesale unsecured borrowing and reserve balances, we show that foreign banks, which make up most of the trading volumes i...

Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, we directly explore the supply of unsecured credit to consumers with the most conspicuous default risk—those with a bankruptcy history. On average, over one-fifth of personal bankruptcy filers receive at least one offer in a given month, with th...