Fostel, Ana; Geanakoplos, John - Cowles Foundation for Research in Economics, Yale University - 2011
-2009. We study the effect of leverage, tranching, securitization and CDS on asset prices in a general equilibrium model with … collateral. We show why tranching and leverage tend to raise asset prices and why CDS tend to lower them. This may seem puzzling … CDS lowers the value of the underlying asset since it is equivalent to tranching cash. …