zawadowskia@ceu.edu 

CV

Google Scholar

Vienna Festival of Finance Theory (annual conference)

Defacto blog about economics (in Hungarian)

Working Papers 

• Rui Albuquerque (Boston College) and Adam Zawadowski
  Private Credit: Risks and Benefits of a Maturity Wall

latest version: August 8, 2025 

Abstract: A maturity wall occurs in private credit funds when the fund reaches its maturity date, where it can no longer roll over its loans. Unlike banks, which are not bound by a maturity wall, private credit funds can better incentivize borrowers, albeit at the cost of inefficient liquidation. In the model, private credit not only expands access to credit but also steals business from banks. By stealing business, it removes riskier loans from banks' balance sheets. At the aggregate level, expected payoff increases but tail events become more severe due to the potential for excessive liquidation by private creditors. The maturity wall can be viewed as implementing a second best relative to an optimal contract with commitment.

• Tomy Lee (CEU), Chaojun Wang (Wharton), and Adam Zawadowski
  Modern Bond Markets (please e-mail me for draft)

latest version: coming soon 

Abstract: The bond market is severely fragmented. We identify a simple mechanism that counteracts this fragmentation.

On modern bond platforms, traders can request quotes for many bonds simultaneously from dealers, then trade any subset of the requested bonds with different dealers. Such List orders generate 80% of bond requests on MarketAxess, the largest platform. We develop a model in which traders submit Lists to substitute among bonds whose prices are uncertain. We document four facts using the universe of requests on MarketAxess and empirical strategies that exploit List-level identifiers. (i) Fifth of bond requests in Lists are abandoned without a fill. (ii) Traders face large uncertainty over quoted spreads as they submit their Lists. (iii) Traders substitute across bonds within the same List. (iv) Passive traders submit Lists for convenience rather than substitution, whereas dealers and active traders intensely substitute within their Lists.

• Martin Oehmke (London School of Economics) and Adam Zawadowski
  The Tragedy of Complexity
  R&R at Management Science

latest version: October 22, 2024 

Abstract: Complexity can create value. At the same time, understanding more complex goods requires more of an agent's attention. We show that equilibrium complexity is generally inefficient when agents face competing demands on their limited attention. Because attention allocation is hump-shaped in complexity, equilibrium complexity is distorted towards intermediate levels: well-understood goods are inefficiently complex, whereas less well-understood goods are oversimplified. We apply our model to  financial institutions facing regulatory bodies and CEOs interacting with corporate divisions. 

Published Papers in Finance and Economics 

• Peter Kondor (London School of Economics) and Adam Zawadowski
  Learning in Crowded Markets
  Journal of Economic Theory (2019), Vol 184: 104936 (link to journal website)
  Online Appendix

Abstract: We present a novel entry-game with endogenous information acquisition to study the welfare effects of opacity and competition. Potential entrants to an opaque market are uncertain about their competitive advantage relative to other investors, i.e. their type. They construct optimal costly signals to learn about their types, where the marginal cost of learning captures the opacity of the market. In general, the individually optimal entry and learning decisions are socially suboptimal. Players over-invest in learning and more opaque markets are associated with more crowding. Nevertheless, more opaque markets might still lead to higher welfare by implying a better trade-off between the degree of crowding and the total cost of learning. Similarly, decreasing the share of smart investors in the market might also improve welfare. However, fierce competition is always detrimental to welfare as it leads to more wasteful learning without changing the level of crowding. 

• Martin Oehmke (Columbia Business School and LSE) and Adam Zawadowski
  The Anatomy of the CDS Market
  Review of Financial Studies, (2017) 30 (1): 80-119
  Data for matching

Abstract: Using novel position and trading data for single-name corporate credit default swaps (CDSs), we provide evidence that CDS markets emerge as "alternative trading venues" that serve a standardization and liquidity role. CDS positions and trading volume are larger for firms with bonds that are fragmented into many separate issues and have heterogeneous contractual terms. Whereas hedging motives are associated with trading volume in the bond and CDS markets, speculative trading concentrates in the CDS. Cross-market arbitrage links the CDS and bond market via the basis trade, compressing the negative CDS-bond basis and reducing price impact in the bond market. 

• Martin Oehmke (Columbia Business School) and Adam Zawadowski
  Synthetic or Real? The Equilibrium Effects of Credit Default Swaps on Bond Markets
  Review of Financial Studies (2015), Vol. 28, 3303-3337 

Abstract: We provide a model of non-redundant credit default swaps (CDSs), building on the observation that CDSs have lower trading costs than bonds. CDS introduction involves a trade-off: It crowds out existing demand for the bond, but improves the bond allocation by allowing long-term investors to become levered basis traders and absorb more of the bond supply. Our framework predicts a negative CDS-bond basis, turnover and price impact patterns that are consistent with empirical evidence, and shows that a ban on naked CDSs can raise borrowing costs. 

• Adam Zawadowski
  Entangled Financial Systems
  Review of Financial Studies (2013), vol. 26(1), 1291-1323 

Abstract: I model an entangled financial system in which banks hedge their portfolio risks using over-the-counter (OTC) contracts. However, banks choose not to hedge counterparty risk and thus the idiosyncratic failure of a bank can lead to a systemic run of lenders. An inefficiency arises because banks engage in a version of risk shifting through the network externalities created by OTC contracts. Banks do not take into account that the costly hedging of low probability counterparty risk also benefits other banks. In the model, it is welfare improving to tax OTC contracts to finance a bailout fund. 

Published Papers in Econophysics 

• Adam G. Zawadowski, Gyorgy Andor, and Janos Kertesz 
  Short-term market reaction after extreme price changes of liquid stocks
  Quantitative Finance (2006), vol. 6, Pages 283-295 (link to journal website) 

• A. G. Zawadowski, J. Kertesz, and G. Andor
  Large price changes on small scales
  Physica A (2004), vol. 344, Pages 221-226, APFA4 conference proceedings 

• J. Kertesz, L. Kullmann, A. G. Zawadowski, R. Karadi, K. Kaski
  Correlations and response: absence of detailed balance on the stock market
  Physica A (2003), vol. 324, Pages 74-80, conference proceedings 

• A.G. Zawadowski, R. Karadi, and J. Kertesz
  Price drops, fluctuations, and correlation in a multi-agent model of stock markets
  Physica A (2002), vol. 316, Pages 403-412 

 Publications in Hungarian / Magyar nyelvű publikációk 

• Zawadowski Ádám
  Kezelési költségük határozza-e meg a Magyarországon forgalmazott részvénypiaci befektetési alapok teljesítményét?
  Közgazdasági Szemle, 2017. november, 1186—1201. o.
  Kivonat: E tanulmány azt vizsgálja, hogy a kezelési költségekkel mennyiben magyarázható a Magyarországon forgalmazott részvénypiaci befektetési alapok teljesítménye. Az alapspecifikáció szerint, ha egy alapnak 1 százalékponttal magasabb a kezelési költsége, akkor az alap átlagosan több mint 1 százalékponttal rosszabbul teljesít a referenciahozamhoz képest (Jensen alfája). A szerző megmutatja, hogy több alap, bár hivatalosan aktív befektetési stratégiát hirdet, valójában csak az adott indexet követi. Továbbá arra is rávilágít, hogy milyen nehézségeket okoz a teljesítmény mérésében, hogy a Budapesti Értéktőzsde által létrehozott CETOP referenciaindex nem tartalmazza az osztalékokat, és kitér ennek orvoslására is.
  A cikk két fő üzenete közérthetően:

  • Hová tűnik a pénzünk, ha részvényekbe fektetünk? Defacto blog, 2016. május 23

  • Orrunk előtt az álombefektetés? Defacto blog, 2016. június 20. 

Old and Discontinued Projects 

• Adam Zawadowski
  Interwoven Lending, Uncertainty, and Liquidity Hoarding
  latest version: March 15, 2011
  Abstract: This paper shows how uncertainties about funding in an interwoven system of intermediation can lead to excessive liquidity hoarding. In the model, funds are channeled through several financial intermediaries until they are finally invested in real assets. In case of a funding shock, banks that are uncertain about their own loans being rolled over, fear bankruptcy and cannot commit to rolling over loans they made to others either. This fear can lead local funding uncertainties to prompt banks to liquidate inefficiently large amounts of real assets without any defaults in equilibrium. The results hold even though the only source of risk aversion in the model is due to bankruptcy cost, intermediaries are otherwise risk-neutral. The model suggests a novel mechanism for explaining credit crunches in crisis episodes. 

• Adam Zawadowski
  The Consumption of Active Investors and Asset Prices
  latest version: March 6, 2010
  Abstract: This paper uses macroeconomic data to measure the consumption of active investors that are wealthy and derive a large fraction of their income from the capital they own. The resulting stochastic discount factor is tested on the time series and cross section of asset returns and yields reasonable relative risk-aversion coefficient estimates using standard CRRA preferences. The main innovation of the paper is to use flow of funds and income data to measure consumption expenditure of active households: this allows us to construct a proxy even though no reliable direct measure is available. Stock prices do not only react to aggregate shocks but also to redistributional shocks between passive and active households.