Essays in financial economics

Abstract

This thesis addresses two phenomena, which are commonly observed in the financial markets but so far have received relatively little attention in the literature. By putting these issues into a theoretical framework I provide a deeper understanding of their mechanisms as well as their possible impact on the market as a whole. The aim of the first part of the thesis is to provide a rationale why informed traders in the financial markets voluntarily share information with others. The success of online chatting platforms within the financial service industry shows that traders very much like to communicate with each other. Standard theory however suggests that by sharing information, traders reduce their informational advantage and thus decrease their profits. The aim of this work is to reconciliate theory with the facts by providing an explanation on why sharing information could be profitable for traders as well as to investigate the effects of information sharing on the market as a whole. The second part of the thesis analyses the role of credit insurance on debt renegotiation. During the renegotiation of private debt in Greece it has become apparent that the existence of credit insurance significantly changes investor behavior when it comes to their willingness to accept a deal. This article explores the impact of credit insurance on the bargaining process as well as how it changes lending conditions for the issuer of debt.