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Global Collateral and Capital Flows
Fostel, Ana - 2019
Cross-border financial flows arise when (otherwise identical) countries differ in their abilities to use assets as collateral to back financial contracts. Financially integrated countries have access to the same set of financial instruments, and yet there is no price convergence of assets...
Persistent link: https://www.econbiz.de/10012891602
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Quantitative Easing, Collateral Constraints, and Financial Spillovers
Geanakoplos, John - 2019
The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a...
Persistent link: https://www.econbiz.de/10012896238
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Global Collateral : How Financial Innovation Drives Capital Flows and Increases Financial Instability
Fostel, Ana - 2017
We show that cross-border financial flows arise when countries differ in their abilities to use assets as collateral. Financial integration is a way of sharing scarce collateral. The ability of one country to leverage and tranche assets provides attractive financial contracts to investors in the...
Persistent link: https://www.econbiz.de/10012962544
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Leverage and Default in Binomial Economies : A Complete Characterization
Fostel, Ana - 2015
Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...
Persistent link: https://www.econbiz.de/10013026734
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Financial Innovation, Collateral and Investment
Fostel, Ana - 2015
Financial innovations that change how promises are collateralized can affect investment, even in the absence of any … change in fundamentals. In C-models, the ability to leverage an asset always generates over-investment compared to Arrow … Debreu. The introduction of CDS always leads to under-investment with respect to Arrow Debreu, and in some cases even …
Persistent link: https://www.econbiz.de/10013026735
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Leverage and Default in Binomial Economies : A Complete Characterization
Fostel, Ana - 2014
Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium is equivalent (in real allocations and prices) to another equilibrium in which there is no...
Persistent link: https://www.econbiz.de/10013049137
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Quantitative Easing, Collateral Constraints, and Financial Spillovers
Geanakoplos, John - 2018
The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a...
Persistent link: https://www.econbiz.de/10012906607
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Tranching, CDS and Asset Prices : How Financial Innovation Can Cause Bubbles and Crashes
Fostel, Ana; Geanakoplos, John - 2011
We show how the timing of financial innovation might have contributed to the mortgage boom and then to the bust of 2007-2009. 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...
Persistent link: https://www.econbiz.de/10014180051
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Monitoring Leverage
Geanakoplos, John - 2011
We discuss how leverage can be monitored for institutions, individuals, and assets. While traditionally the interest rate has been regarded as the important feature of a loan, we argue that leverage is sometimes even more important. Monitoring leverage provides information about how risk builds...
Persistent link: https://www.econbiz.de/10013117902
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Tranching, CDS and Asset Prices : How Financial Innovation Can Cause Bubbles and Crashes
Fostel, Ana - 2011
We show how the timing of financial innovation might have contributed to the mortgage bubble and then to the crash of 2007-2009. We show why tranching and leverage first raised asset prices and why CDS lowered them afterwards. This may seem puzzling, since it implies that creating a derivative...
Persistent link: https://www.econbiz.de/10013121404