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We offer a general equilibrium analysis of cryptocurrency pricing. The fundamental value of the cryptocurrency is its stream of net transactional benefits, which depend on its future prices. This implies that, in addition to fundamentals, equilibrium prices reflect sunspots. This in turn implies multiple equilibria and extrinsic volatility, that is, cryptocurrency prices fluctuate even when fundamentals are constant. To match our model to the data, we construct indices measuring the net transactional benefits of Bitcoin. In our calibration, part of the variations in Bitcoin returns reflects changes in net transactional benefits, but a larger share reflects extrinsic volatility. Article Note: Bruno Biais is at HEC Paris. Christophe Bisière, Matthieu Bouvard, and Catherine Casamatta are at Toulouse School of Economics, Université Toulouse Capitole (TSM-Research). Albert J. Menkveld is at Vrije Universiteit Amsterdam. Many thanks for helpful comments to the editor, Stefan Nagel, the Associate Editor, two referees, as well as Will Cong, Patrick Fève, René Garcia, Co-Pier Georg, Alexander Guembel, Zhiguo He, Michael Kumhof, Nour Meddahi, Eric Mengus, Julien Prat, George Tauchen, Harald Uhlig, Boris Vallée, Stefan Voigt, Yu Wang and conference and seminar participants in the 2018 BIS Research Network meeting, the 2018 Becker Friedman Institute Conference on Blockchains and Cryptocurrencies, the 2018 Ridge Forum, the 2018 EuroFIT Conference at UCL, the 2019 WEF Davos, the 2019 Toronto FinTech Conference, the 2019 Tokenomics Conference, the 2019 Sustainable Finance Center Conference and Financial Econometrics Conference at TSE, the 2019 ESSFM in Gerzensee, the 2019 CEBRA Annual Meeting, the 2019 EFA Meeting, the 2020 AFA meeting, the 2021 AFFI meeting, Autorité des Marchés Financiers, Banque Centrale du Luxembourg, Banque de France, Cambridge University, CEIBS Shanghai, Central European University, Fudan University, HEC Paris, HEC Liège, Imperial College, Said Business School, University of Chile FEB, University of New South Wales, University Paris Dauphine, University of Technology Sydney and University of Vienna. We gratefully acknowledge support from the Jean-Jacques Laffont Digital Chair, the Norwegian Finance Initiative (NFI), the Netherlands Organization for Scientific Research (NWO Vici grant), the ANR (grant ANR-17-EURE-0010), EconPol Europe, and the European Research Council (grant 882375, WIDE). We have read The Journal of Finance disclosure policy and have no conflicts of interest to disclose. CAPTION(S): Appendix S1: Internet Appendix. Replication Code. Byline: BRUNO BIAIS, CHRISTOPHE BISIÈRE, MATTHIEU BOUVARD, CATHERINE CASAMATTA, ALBERT J. MENKVELD

Byline: BRUNO BIAIS, FLORIAN HEIDER, MARIE HOEROVA ABSTRACT Derivatives activity, motivated by risk-sharing, can breed risk-taking. Bad news about the risk of an asset underlying a derivative increases protection sellers' expected liability and undermines their risk-prevention incentives. This limits risk-sharing, creates endogenous counterparty risk, and can lead to contagion from news about the hedged risk to the balance sheet of protection sellers. Margin calls after bad news can improve protection sellers' incentives and in turn enhance risk-sharing. Central clearing can provide insurance against counterparty risk but must be designed to preserve risk-prevention incentives. Article Note: Biais is with the Toulouse School of Economics (CRM/CNRS IDEI). Heider and Hoerova are with the European Central Bank and CEPR. We would like to thank the Acting Editor (Markus Brunnermeier), an Associate Editor, two anonymous referees, our discussants Ulf Axelson, Jonathan Berk, Sugato Bhattacharyya, Bruce Carlin, Simon Gervais, Artashes Karapetyan, Christine Parlour, Alp Simsek, and Lauri Vilmi, as well as numerous seminar and conference participants for their comments and suggestions. The views expressed do not necessarily reflect those of the European Central Bank or the Eurosystem. Biais gratefully acknowledges the support of the European Research Council (Grant 295484-TAP). We have read the Journal of Finance's disclosure policy and have no conflicts of interest to disclose. CAPTION(S): Appendix S1: Internet Appendix.

Byline: KENNETH J. SINGLETON, BRUNO BIAIS, MICHAEL ROBERTS ***** No abstract is available for this article. *****

To purchase or authenticate to the full-text of this article, please visit this link: http://onlinelibrary.wiley.com/doi/10.1111/jofi.12071/abstract Byline: KENNETH J. SINGLETON, BRUNO BIAIS, MICHAEL ROBERTS ***** No abstract is available for this article.

As a centralized, computerized, limit order market, the Paris Bourse is particularly appropriate for studying the interaction between the order book and order flow. Descriptive methods capture the richness of the data and distinctive aspects of the market structure. Order flow is concentrated near the quote, while the depth of the book is somewhat larger at nearby valuations. We analyze the supply and demand of liquidity. For example, thin books elicit orders and thick books result in trades. To gain price and time priority, investors quickly place orders within the quotes when the depth at the quotes or the spread is large. Consistent with information effects, downward (upward) shifts in both bid and ask quotes occur after large sales (purchases). (Reprinted by permission of the publisher.)

This paper compares centralized and fragmented markets, such as floor and telephone markets. Risk-averse agents compete for one market order. In centralized markets, these agents are market order or limit order traders. They are assumed to observe the quotes of their competitors. In fragmented markets they are dealers. They can only assess the positions of their competitors. We analyze differences in bidding strategies reflecting differences in market structures. The equilibrium number of dealers is shown to be increasing in the frequency of trades and the volatility of the value of the asset. The expected spread is shown to be equal in both markets, ceteris paribus. But the spread is more volatile in centralized than in fragmented markets. (Reprinted by permission of the publisher.)

We analyze the optimal financing of investment projects when managers must exert unobservable effort and can also switch to less profitable riskier ventures. Optimal financing contracts can be implemented by a combination of debt and equity when the risk-shifting problem is the most severe while stock options are also needed when the effort problem is the most severe. Worsening of the moral hazard problems leads to decreases in investment and output at the macroeconomic level. Moreover, aggregate leverage decreases with the risk-shifting problem and increases with the effort problem. (Reprinted by permission of the publisher.)