Research
Published or accepted papers
Under-Diversification and Idiosyncratic Risk Externalities
(joint with Felipe Iachan and Chao Zi)
Journal of Financial Economics
Endogenous idiosyncratic uncertainty and under-diversification lead to underinvestment and excessive aggregate risk-taking. Risk externalities can be measured using asset-pricing data and have implications for optimal financial regulation.
Optimal Fiscal Consolidation under Frictional Financial Markets
Economic Journal
Optimal policy when fiscal policy can be used to stimulate the economy or pay off debt and reduce sovereign spreads. Spending should not be used as a stimulus tool. Fiscal consolidation is optimal, as planner raises and front-load taxes.
Fiscal Policy and the Monetary Transmission Mechanism
(joint with Nicolas Caramp)
Review of Economic Dynamics
Novel analytical decomposition showing the role of fiscal policy in the monetary transmission mechanism. Fiscal variables determine the initial response of inflation to monetary shocks, the possibility of Neo-Fisherian effects, the effectiveness of forward guidance, and the paradox of flexibility.
Machine Learning for Continuous-Time Finance
(joint with Victor Duarte and Diogo Duarte)
Review of Financial Studies, accepted
Algorithm for solving nonlinear high-dimensional continuous-time models in finance using deep learning. The method handles problems with a large number of state variables, kinks, and jumps. Applications in asset pricing, corporate finance, and portfolio choice.
Working papers
Monetary Policy and Wealth Effects: The Role of Risk and Heterogeneity
(joint with Nicolas Caramp)
Journal of Finance, revise and resubmit
A monetary model with rare disasters and heterogeneous beliefs. Tractable framework capturing the impact of monetary shocks on asset prices and the real economy. Risk and heterogeneity are major drivers of the output response to monetary policy.
Liquidity and Risk in OTC Markets: A Theory of Asset Pricing and Portfolio Flows
(joint with Juan Passadore and Mahyar Kargar)
Journal of Finance, revise and resubmit
Model of risk premia and liquidity frictions capturing main features of Covid-19 crisis: large negative shock leads to portfolio reallocations, rise in risk premia and decline in interest rates, increase in trading volume, and deterioration of market liquidity.
The Risk Channel of Unconventional Monetary Policy
Review of Financial Studies, revise and resubmit
Model of unconventional monetary policy (UMP) with heterogeneity in investor’s risk tolerance and limited portfolio reallocation. The framework allows us to study the impact of UMP on risk premium, volatility, growth, and financial stability.
Heterogeneous Beliefs and Business Cycles
(joint with Saki Bigio and Eduardo Zilberman)
Review of Economic Studies, reject and resubmit
Model where heterogeneous beliefs are the main driver of business cycles and asset prices. Investors have heterogeneous beliefs about TFP growth in a complete-market production economy where employment is hired in advance. Extrapolation adds volatility to asset prices and labor markets.
Risk-taking over the Life Cycle: Aggregate and Distributive Implications of Entrepreneurial Risk
(joint with Robert M. Townsend)
Quantitative model of entrepreneurship under limited idiosyncratic insurance. Relaxing risk constraints reduces the risk premium, boosts investment, increases inequality in the short run, and reduces it in the long run, generating a financial Kuznets curve.
Work in progress
Dissecting the Aggregate Market Elasticity
(joint with Victor Duarte and Mahyar Kargar)