about

I am a senior economist at the Board of Governors of the Federal Reserve System. My research interests include asset pricing, financial intermediation, and safe assets.

I received my Ph.D. in financial economics from the Yale School of Management. Previously, I was an economist at Morgan Stanley and a research associate at the Yale Program on Financial Stability.

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publications and accepted papers

Making Money
with Gary B. Gorton and Sharon Y. Ross Forthcoming, Journal of Finance Abstract · SSRN · NBER WP #29710

It is hard for private agents to produce money that circulates at par with no questions asked about its backing. Stablecoins, digital tokens designed to maintain a stable value, are the newest iteration of privately produced money. We study stablecoins to understand how privately produced money develops a convenience yield. We document that most stablecoins have low — and often negative — convenience yields. We show that four forces help them command a larger convenience yield: aggregate factors, reputation, technology, and dollar demand. Coin-specific variation in these forces has become increasingly important, helping explain why some stablecoins gain wider adoption.

The Treasury Collateral Spread and Levered Safe-Asset Production
Accepted, Management Science
2020 BlackRock Applied Research Award Finalist
Abstract · SSRN

Banks are vital suppliers of money-like safe assets, which they produce by issuing short-term liabilities and pledging collateral. But their ability to create safe assets varies over time as leverage constraints fluctuate. I write a simple model to describe private safe-asset production when intermediaries face leverage constraints. I directly measure leverage constraints using confidential supervisory data on high-frequency changes in the largest banks' repos. The collateral spread — the maturity-matched yield spread between Treasuries used as repo collateral more often and Treasuries used less often — compensates for bank leverage risk and averages about 0.5 basis points, a sizable magnitude roughly equal to 60 percent of the 5-year Treasury cheapest-to-deliver basis.

Leverage and Stablecoin Pegs
with Gary B. Gorton, Elizabeth C. Klee, Sharon Y. Ross, and Alexandros Vardoulakis
Accepted, Journal of Financial and Quantitative Analysis
Abstract · SSRN · NBER WP #30796 · VoxEU Column

Stablecoins are a new form of private money. They are fragile but largely trade at par. How? We present a model and empirical work to examine a novel source of demand for stablecoins. Stablecoin owners are indirectly compensated for run risk by lending their coins to crypto speculators. The stablecoin can then support its $1 peg, but this arrangement links crypto speculation to traditional financial markets where stablecoins invest their reserves.

Investor Information and Bank Instability During the Euro Crisis
with Silvia Iorgova
Journal of Financial Stability (2023)
Abstract · Published Version

Outside of financial crises, investors have little incentive to produce private information on banks’ short-term liabilities held as information-insensitive safe assets. The same does not hold during crises. We compare the information effects of different policy interventions. We measure information production using credit default swap spreads during the Global Financial Crisis and the European debt crisis. We study abnormal information production around major events and find that capital injections reduced abnormal information production while early European stress tests increased it. High levels of information production predict bank balance sheet contraction and higher government expenditures to support financial institutions.

Who Ran on Repo?
with Gary B. Gorton and Andrew Metrick
AEA Papers and Proceedings (2020)
Abstract · Published Version

The sale and repurchase (repo) market played a central role in the recent financial crisis. From the second quarter of 2007 to the first quarter of 2009, net repo financing provided to U.S. banks and broker-dealers fell by about $900 billion — more than half of its pre-crisis total. Significant details of this “run on repo” remain shrouded because many of the providers of repo finance are lightly regulated or unregulated cash pools. In this paper, we supplement the best available official data sources with a unique market survey and data from the footnotes of public companies’ quarterly filings to provide an updated picture of the dynamics of the repo run. We provide evidence that the flight of foreign financial institutions, domestic and offshore hedge funds, and other unregulated cash pools predominantly drove the run. Our analysis highlights the danger of relying exclusively on data from regulated institutions, which would miss the most important parts of the run.

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working papers

Quantities and Covered-Interest Parity
with Tobias J. Moskowitz, Sharon Y. Ross, and Kaushik Vasudevan
Revise & Resubmit, Journal of Finance Abstract · SSRN · NBER WP #32707 · FEDS WP #2024–061

Studies of intermediated arbitrage argue that bank balance sheets are an important consideration, yet little evidence exists on banks’ positioning in this context. Using confidential supervisory data (covering $25 trillion in daily notional exposures) we examine banks’ positions in connection with covered-interest parity (CIP) deviations. Exploiting cross-sectional variation in CIP deviations that have largely challenged existing theories, we document three novel forces that drive bases: 1) foreign safe asset scarcity, 2) market power and segmentation of banks specializing in different markets, and 3) concentration of demand. Our findings shed empirical light on the interplay of frictions influencing banks’ provision of dollar funding.

Cash-Hedged Stock Returns
with Landon J. Ross and Sharon Y. Ross
Revise & Resubmit, Review of Asset Pricing Studies
2023 SWFA best paper award winner in investments
2022 FMA best paper semifinalist in investments
Abstract · SSRN · FEDS WP #2022–055 · OFR WP #22–03

Corporate cash piles vary across companies and over time. A firm’s cash holding is an implicit position in a low-return asset that is correlated across firms. Cash generates variation in beta estimates. We show how investors can hedge out the cash on firms’ balance sheets when making portfolio choices. We decompose stock betas into components that depend on the firm’s cash holding, return on cash, and cash-hedged return. Common asset pricing premia — size, value, and momentum — have large implicit cash positions. Portfolios of cash-hedged premia often have higher Sharpe ratios because firms’ cash returns are correlated.

Where Collateral Sleeps
with Gary B. Gorton and Sharon Y. Ross
Abstract · SSRN

Banks can use the discount window to fend off a run by pre-positioning their assets with the Fed and borrowing against them. Pre-positioning insures against runs but can be costly. We study the forces driving the largest banks’ pre-positioning behavior. Banks pre-position more in bad times but less when stigma is higher or collateral is desirable elsewhere. We document a pre-positioning stigma that banks face when disclosing they have placed collateral with the Fed, even absent borrowing. Riskier banks are more likely to disclose because the signaling value outweighs stigma for these banks. Even though pre-positioning is no panacea — banks still need good assets to borrow against — it can help on the margin. Regulators and bankers alike should worry about where collateral sleeps each night.

Safe-Asset Migration
Abstract · SSRN

Post-crisis reforms changed the location of safe-asset production. I propose a pair of tests to identify who issues safe assets and which safe-asset issuers opportunistically time issuance when the price of safe assets is high. The Federal Home Loan Bank (FHLB) system is a newly crucial safe-asset producer. FHLB debt issuance is an important determinant of the price of safe assets, and FHLB debt issuance responds to day-to-day fluctuations in safe-asset demand — measured via the convenience yield. FHLBs issue more after an unexpected increase in the convenience yield, and an unexpectedly large FHLB issue decreases the convenience yield. The FHLBs’ ability to produce safe assets depends on their implicit government backing, a potential source of concern for future policymakers.

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