Tehran Institute for Advanced Studies (TeIAS)

/ Financial Intermediation: Networks and Search Models __ Maryam Farboodi

Talk

Financial Intermediation: Networks and Search Models

May 20, 2017

Venue

Khatam University, Building No2.
Address: Mollasadra Blvd., North Shirazi St., East Daneshvar St., No.17. See location on Google map

+982189174612

Maryam Farboodi

Overview

Intermediation has been a centerpiece of policy discussions since the financial crisis. Given the complexity of financial institutions, various tools has been used to study different aspects of intermediation. This talk focuses on two: network models and search models. In the first part, I develop a network model of the financial sector in which endogenous intermediation among debt financed banks generates excessive systemic risk. I show that a core-periphery network few highly interconnected and many sparsely connected banks endogenously emerges in sty model. In the second part, I use a search model to study a frictional asset market where ex-ante homogeneous traders irreversibly choose their contact rate and then periodically meet in pairs. We use the model to explore the distributional properties of financial institution: we prove that the contact rate distribution has a Pareto tail with parameter two and that middlemen emerge endogenously: a zero measure of traders choose to have continuous contact with the market and account fors positive fraction of all meetings. I compare the properties of socially efficient and equilibrium allocation in both models.

Biography

Maryam Farboodi has earned a BSc degree from Sharif University in Computer Engineering, a MSc degree from University of Maryland in Computer Science, and a joint PhD from University of Chicago in Economics and Finance. She is an assistant professor of Economics at Princeton University, Bendheim Center for Finance. Her research focuses on different aspects of intermediation in Financial Markets, as well as information economics and macro finance.