Research

Published papers

Mitigating Fire Sales with a Central Clearing Counterparty, Journal of Financial Intermediation, forthcoming [Link] / [Replication]

A CCP can mitigate asset fire sales. Historical evidence from the first crisis in which a CCP played this role. 

The Economics of Central Clearing (with A. Menkveld), Annual Review of Financial Economics, Vol. 13, pp. 153-178 (2021), [Link]. 

Survey of the literature on central clearing, with discussion of both theory and empirics, as well as open questions.

The Private Production of Safe Assets (with M. Kacperczyk and C. Pérignon), Journal of Finance, Vol. 76, No. 2, pp. 495-535 (2021), [Link]. 

Short-term debt securities issued by banks can be perceived as safe by investors, but private safety vanishes during stress.

Frictional Unemployment with Stochastic Bubbles (with E. Wasmer), European Economic Review, Vol. 122 (2020). [Link]

Introducing financial bubbles in the search-and-matching model of the labor market significantly improves its ability to match the data. 

The Value of Central Clearing, Journal of Finance, Vol. 75, No. 4, pp. 2021-2053 (2020). [Link]

    The first derivatives CCP in history (Le Havre, 1882) changed the geography of trade flows Europe-wide by completing markets and mitigating adverse selection. 

Who Bears Interest Rate Risk? (with P. Hoffmann, S. Langfield and F. Pierobon), Review of Financial Studies, Vol. 32, No. 8, pp. 2921-2954 (2019). [Link]

    Banks' exposures to interest rate risk are heterogenous cross-sectionally, depend on country-level loan rate conventions, and imply redistributive effects of monetary policy. 

The Failure of a Clearinghouse: Empirical Evidence (with V. Bignon), Review of Finance, Vol. 24, No. 1, pp. 99-128 (2020). [Link]

    First empirical study of CCP failure and CCP risk-shifting. Also shows evidence of distortions induced by resolution frameworks when supervisors have discretionary powers.     

Bank Interest Rate Risk Management, Management Science, Vol. 65, No. 12, pp. 5449-5956 (2019). [Link]

    Interest rate derivative positions positions by banks exhibit surprising features, which can be explained by hedging in the presence of financial frictions. 

Wholesale Funding Dry-Ups (with C. Pérignon and D. Thesmar), Journal of Finance, Vol. 73, No. 2, pp. 575-617 (2018). [Link] 

    Investors in wholesale markets seek information-insensitive debt, and cut funding based on negative news. Adverse selection does not explain bank funding fragility. 

Central Clearing and Collateral Demand. (with D. Duffie and M. Scheicher), Journal of Financial Economics, Vol. 116, No. 2, pp. 237-256 (2015). [Link]

   Market structure affects the netting and diversification benefits of CCPs. Therefore, the effect of central clearing on collateral demand is ambiguous.  

The Network Structure of the CDS Market and its Determinants. (with M. Scheicher and T. Peltonen),  Journal of Financial Stability, Vol. 13, pp. 118-133 (2014). [Link]

    First empirical study of the CDS network structure using bilateral exposure data. Activity is concentrated in a core of dealers, but risk is shared more broadly. 

Working papers

From the Saving Glut to Financial Instability: Evidence from the Silicon Valley Bank Failure, [Link] / [Replication] / Press coverage : Reuters, FT/The Banker, VoxEU.

    Abstract: I show that saving gluts spur financial instability. In the US, banks locally exposed to its root causes -- the rise in household wealth inequality and higher savings by intangible-intensive firms  -- massively increased deposits since 2000, leading to an unprecedented deposit-to-GDP ratio and to a large increase in uninsured deposits. To causally identify an impact of the saving glut on financial instability, I rely on the unexpected failure of Silicon Valley Bank in March 2023: other US banks with higher local exposure to either wealth inequality or intangible-intensive firms experienced significantly larger drops in stock prices.

Household Finance at the Origin: Home Ownership as a Cultural Heritage from Agriculture, [Link] / [Replication]

    Abstract: I show that home ownership decisions across countries and individuals are shaped by a cultural heritage from agriculture. For centuries, dominant assets in pre-industrial economies were either land or cattle. Consequently, the type of farming prevailing locally shaped preferences and believes about the relative value of immovable and movable assets. This cultural heritage had long-lasting consequences. Today, individuals originating from societies with a history of crop agriculture -- where the dominant asset was land -- are more likely to be homeowners. For identification, I rely both on home ownership decisions of second-generation immigrants in the US and on instrumental variables.

The Origins of Limited Liability: Catering to Safety Demand with Investors' Irresponsibility, [Link] / [Replication]

    Abstract: Limited liability is a key feature of corporate law. Using data on asset prices and capital flows in mid-19th century England, I argue that its liberalization was not decided to relax firms' financing constraints, but to satisfy investors' demand for "safe" stores of value. Limited liability eliminated adverse selection about the quality of other shareholders; stocks could be held to store wealth in diversified portfolios, without extended forms of responsibility. Prices of newly issued stocks are consistent with this hypothesis. Thus, the quest for "safe" stores of value explains not only features of debt markets, but also of equity markets.

Evading Corporate Responsibilities: Evidence from the Shipping Industry, [Link] / [Replication]

    Abstract: I show that the maritime shipping industry - handling above 80% of global trade flows - has evolved over the past decades to systematically evade "corporate responsibilities," i.e., compliance with regulatory standards and potential tort liabilities. Shipping firms increasingly dissociated legal and ultimate ownership, fragmented assets in one-ship subsidiaries, used flags of convenience, and evaded end-of-life responsibilities with "last-voyage flags." Microeconomic tests confirm that responsibility evasion, amidst global competition, is a dominant motive behind these patterns. These findings have implications for our understanding of corporate social responsibility, of extended forms of liability, and of the "dark side" of globalization.

Set-Up Costs and the Financing of Young Firms (with J.-S. Mésonnier and F. Derrien), [Link].

    Abstract: We show that set-up costs are a key determinant of the capital structure of young firms. Theoretically, when firms face high set-up costs, they can only be established by lengthening debt maturity. Empirically, we use a large sample of French firms to show that young firms have a significantly higher leverage and issue longer-maturity debt than seasoned companies. As predicted by the model, these patterns are stronger in high set-up cost industries and for firms with lower profitability. Last, we show that, following an exogenous shock that reduces banks' supply of long-term loans, young firms in high set-up cost industries grow significantly less. 

Entry in Banking Markets (with M. Traversa), [Link].

    Abstract: We empirically show that adverse selection is a key determinant of banking market structure. Using newly-constructed panel data on all US bank branches over the 1981-2016 period, we study banks' decisions to expand or contract geographically. First, we show that banks are more likely to expand in counties that are similar, in terms of industry shares, to those in which they already have branches. Second, we show that banks are more likely to contract in more similar areas. These results are consistent with the theory that banks value diversification, but that informational barriers to entry prevent them from achieving optimal scale. These findings have implications for the assessment of banking competition and for the rise of fintech.

Interest Rate Risk in Banking: A Survey, [Link], Revised version: July 2016.  

    Abstract: This paper surveys the theoretical and empirical literature on interest rate risk in banking. Theoretically, it considers the origins of interest rate risk and its allocation. Interest rate risk is non-diversifiable and does not originate from the banking sector, but from the potential time inconsistency between future aggregate demand and supply of consumption goods. Empirically, we discuss measurement and stylized facts. Banks bear part of total interest rate risk, but also engage in risk management and risk-sharing with non-financial agents. They transfer large amounts of risk to households and firms, by writing interest rate-contingent loan and deposit contracts. We consider the determinants of the aggregate exposure to interest rate risk and the pricing of marginal units of risk. Finally, interest rate policy, both conventional and non-conventional, is discussed.

Citations

    See my Google Scholar webpage.