Radoslav Raykov is a Principal Analyst at the Financial Stability Department at the Bank of Canada. He holds a B.A. in Economics from Harvard University and a Ph.D. in Economics from Boston College. Prior to joining the Bank, he worked at the Boston Fed and taught at Harvard University.
His research interests focus broadly on financial stability, and in particular, on: systemic risk, banking regulation and reform, financial reform in derivatives markets and OTC derivatives markets, collateral and moral hazard in financial markets, the insurability of low-probability, high-impact risks, catastrophe insurance and risk diversification, and mechanism design.
Many decentralized markets are able to attain a stable outcome despite the absence of a central authority (Roth and Vande Vate, 1990). A stable matching, however, need not be efficient if preferences are weak. This raises the question whether a decentralized market with weak preferences can attain Pareto efficiency in the absence of a central matchmaker.
This paper studies how the allocation of residual losses affects trading and welfare in a central counterparty. I compare loss sharing under two loss-allocation mechanisms – variation margin haircutting and cash calls – and study the privately and socially optimal degree of loss sharing.
Classical oligopoly models predict that firms differentiate vertically as a way of softening price competition, but some metrics suggest very little quality differentiation in the U.S. auto insurance market.