Editorial Reviews
Sudipto Bhattacharya, Professor of Finance, London School of Economics
"Freixas and Rochet have coauthored an excellent book, encompassing most of the major developments in the theoretical literature of the last twenty years on credit markets and rationing, the monitoring and risk-sharing roles of financial intermediaries, the modelling of liquidity risk and its allocational consequences, bank runs and attendant regulatory measures, and the control of risk-taking by banks subject to deposit insurance. Elegant in its conception, comprehensive in its coverage of the core literature, and lucid in its expositional clarity, this book should be suitable for Masters level and advanced undergraduate courses on Money and Banking, as well as a background reference book for specialized Doctoral courses in Finance. Professors Freixas and Rochet, whose earlier research work provided major impetus to Contract Theory, have made a splendid and much needed expositional contribution to their recently adapted field of Financial Economics, for students and teachers alike."
Book Description
Twenty years ago, most banking courses focused on either management or monetary aspects of banking, with no connecting. Since then, a microeconomic theory of banking has developed, mainly through a switch of emphasis from the modeling of risk to the modeling of imperfect information. This asymmetric information model is based on the assumption that different economic agents possess different pieces of information on relevant economic variables, and that they will use the information for their own profit. The model has been extremely useful in explaining the role of banks in the economy. It has also been useful in pointing out structural weaknesses of the banking sector that may justify government intervention--for example, exposure to runs and panics, the persistence of rationing in the credit market, and solvency problems.
Microeconomics of Banking provides a guide to the new theory. Topics include why financial intermediaries exist, the industrial organization approach to banking, optimal contracting between lenders and borrowers, the equilibrium of the credit market, macroeconomic consequences of financial imperfections, individual bank runs and systemic risk, risk management inside the banking firm, and bank regulation. Each chapter ends with a detailed problem set and solutions.
Microeconomics of Banking
Microeconomics of Banking,Xavier Freixas,Jean-Charles Rochet,The MIT Press,0262061937,Banks & Banking,Banks And Banking,Business & Economics,Business / Economics / Finance,Business/Economics,Economics - General,Finance,Information theory in finance,Mathematical models,Microeconomics,Banking,Business & Economics / Economics / General
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