Network and Price Dynamics in a Model of Contagion /

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Bibliographic Details
Author / Creator:Antonie, Carmen Gabriela, author.
Ann Arbor : ProQuest Dissertations & Theses, 2017
Description:1 electronic resource (75 pages)
Format: E-Resource Dissertations
Local Note:School code: 0330
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Other authors / contributors:University of Chicago. degree granting institution.
Notes:Advisors: Robert Shimer Committee members: Fernando Alvarez; Veronica Guerrieri; Lars P. Hansen.
Dissertation Abstracts International, Volume: 78-12(E), Section: A.
Summary:Given an initial financial network and liquidity needs of the agents forming it, I am interested in how that network evolves over time. Who lends to whom? I show that when agents are allowed to lend in the interbank market, they have a bigger incentive to lend to agents to whom they already have a big exposure to, which I relate to agents Bonacich centrality in the financial network. I also show that this is the unique equilibrium when the exposure of the lender is relatively big.
In the second chapter I study an environment of optimal inattention to the stock market where the investor has Epstein-Zin preferences. As in the expected utility case, the solution strategy of an optimal inattention to the stock market can be done in four easy steps. Although the set-up is in continuous time, the fact that the consumer only decides to evaluate his wealth at discrete times allows us to focus on discrete time Epstein-Zin preferences which simplifies the problem considerably. The first important difference with respect to expected utility is that the optimal portfolio will depend on the risk aversion coefficient. Only through the optimal portfolio will the optimal choice of consumption and stopping time be affected. Otherwise, the problem is identical to the case with expected utility.