Acharya, Viral V.; Iyer, Aaditya M.; Sundaram, Rangarajan K. - In: Journal of risk and financial management : JRFM 13 (2020) 8/183, pp. 1-18
We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier … liquid assets. When risk-sharing is primitive, agents self-hedge and hold more liquid assets; this buffers aggregate risks …, resulting in few correlated failures compared to when there is greater risk sharing. We apply this insight to build a model of a …
