Contents -- 1. History and institutions -- 1.1 Introduction -- 1.2 Historical crises in Europe and the US -- 1.3 Crises and stock market crashes -- 1.4 Currency and twin crises -- 1.5 Crises in different eras -- 1.6 Some recent crises -- 1.6.1 The Scandinavian crises -- 1.6.2 Japan -- 1.6.3 The Asian crisis -- 1.6.4 The Russian crisis and long term capital management (LTCM) -- 1.6.5 The Argentina crisis of 2001-2002 -- 1.7 The costs of crises -- 1.8 Theories of crises -- 1.9 Concluding remarks -- 2. Time, uncertainty, and liquidity -- 2.1 Efficient allocation over time -- 2.1.1 Consumption and saving -- 2.1.2 Production -- 2.2 Uncertainty -- 2.2.1 Contingent commodities and risk sharing -- 2.2.2 Attitudes toward risk -- 2.2.3 Insurance and risk pooling -- 2.2.4 Portfolio choice -- 2.3 Liquidity -- 2.4 Concluding remarks -- 3. Intermediation and crises -- 3.1 The liquidity problem -- 3.2 Market equilibrium -- 3.3 The efficient solution -- 3.4 The banking solution -- 3.5 Bank runs -- 3.6 Equilibrium bank runs -- 3.7 The business cycle view of bank runs -- 3.8 The global games approach to finding a unique equilibrium -- 3.9 Literature review -- 3.10 Concluding remarks -- 4. Asset markets -- 4.1 Market participation -- 4.2 The model -- 4.3 Equilibrium -- 4.3.1 Market-clearing at date 1 -- 4.3.2 Portfolio choice -- 4.4 Cash-in-the-market pricing -- 4.5 Limited participation -- 4.5.1 The model -- 4.5.2 Equilibrium -- 4.5.3 Equilibrium with full participation -- 4.5.4 Full participation and asset-price volatility -- 4.5.5 Limited participation and asset-price volatility -- 4.5.6 Multiple Pareto-ranked equilibria -- 4.6 Summary -- 5. Financial fragility -- 5.1 Markets, banks, and consumers -- 5.2 Types of equilibrium -- 5.2.1 Fundamental equilibrium with no aggregate uncertainty -- 5.2.2 Aggregate uncertainty -- 5.2.3 Sunspot equilibria.

5.2.4 Idiosyncratic liquidity shocks for banks -- 5.2.5 Equilibrium without bankruptcy -- 5.2.6 Complete versus incomplete markets -- 5.3 Relation to the literature -- 5.4 Discussion -- 6. Intermediation and markets -- 6.1 Complete markets -- 6.2 Intermediation and markets -- 6.2.1 Efficient risk sharing -- 6.2.2 Equilibrium with complete financial markets -- 6.2.3 An alternative formulation of complete markets -- 6.2.4 The general case -- 6.2.5 Implementing the first best without complete markets -- 6.3 Incomplete contracts -- 6.3.1 Complete markets and aggregate risk -- 6.3.2 The intermediary's problem with incomplete markets -- 6.4 Conclusion -- 7. Optimal regulation -- 7.1 Capital regulation -- 7.1.1 Optimal capital structure -- 7.1.2 Models with aggregate uncertainty -- 7.2 Capital structure with complete markets -- 7.3 Regulating liquidity -- 7.3.1 Comparative statics -- 7.3.2 Too much or too little liquidity? -- 7.4 Literature review -- 7.5 Concluding remarks -- 8. Money and prices -- 8.1 An example -- 8.2 Optimal currency crises -- 8.3 Dollarization and incentives -- 8.4 Literature review -- 8.5 Concluding remarks -- 9. Bubbles and crises -- 9.1 Agency problems and positive bubbles -- 9.1.1 The risk-shifting problem -- 9.1.2 Credit and interest rate determination -- 9.1.3 Financial risk -- 9.1.4 Financial fragility -- 9.2 Banking crises and negative bubbles -- 9.2.1 The model -- 9.2.2 Optimal risk sharing -- 9.2.3 Optimal deposit contracts -- 9.2.4 An asset market -- 9.2.5 Optimal monetary policy -- 9.3 Concluding remarks -- 10. Contagion -- 10.1 Liquidity preference -- 10.2 Optimal risk sharing -- 10.3 Decentralization -- 10.4 Contagion -- 10.4.1 The liquidation "pecking order" -- 10.4.2 Liquidation values -- 10.4.3 Buffers and bank runs -- 10.4.4 Many regions -- 10.5 Robustness -- 10.6 Containment -- 10.7 Discussion -- 10.8 Applications.

10.8.1 Upper and Worms (2004) -- 10.8.2 Degryse and Nguyen (2004) -- 10.8.3 Cifuentes, Ferrucci, and Shin (2005) -- 10.9 Literature review -- 10.10 Concluding remarks -- Index -- A -- B -- C -- D -- E -- F -- G -- H -- I -- J -- K -- L -- M -- N -- O -- P -- Q -- R -- S -- T -- U -- V -- W -- X -- Y -- Z.