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Liquidity, Pledgeability, and the Nature of Lending
Diamond, Douglas W.; Hu, Yunzhi; Rajan, Raghuram G. - 2022
We develop a theory of how corporate lending and financial intermediation change based on the fundamentals of the firm and its environment. We focus on the interaction between the prospective net worth or liquidity of an industry and the firm’s internal governance or pledgeability. Variations...
Persistent link: https://www.econbiz.de/10013404677
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Procyclicality and Monetary Aggregates
Shin, Hyun Song - 2011
Financial intermediaries borrow in order to lend. When credit is increasing rapidly, the traditional deposit funding (core liabilities) is supplemented with other funding (non-core liabilities). We explore the hypothesis that monetary aggregates reflect the size of non-core and core liabilities...
Persistent link: https://www.econbiz.de/10013129118
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Procyclical Leverage and Value-at-Risk
Adrian, Tobias - 2013
The availability of credit varies over the business cycle through shifts in the leverage of financial intermediaries. Empirically, we find that intermediary leverage is negatively aligned with the banks' Value-at-Risk (VaR). Motivated by the evidence, we explore a contracting model that captures...
Persistent link: https://www.econbiz.de/10013083803
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The Macroeconomics of Shadow Banking
Moreira, Alan - 2014
collateral is scarce. We call this process shadow banking. A rise in uncertainty raises demand for crash-proof liquidity, forcing … intermediaries to delever and substitute toward safe, collateral- intensive liabilities. Shadow banking shrinks, causing the … liquidity supply to contract, discount rates and collateral premia spike, prices and investment fall. The model produces slow …
Persistent link: https://www.econbiz.de/10013050154
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A Model of Shadow Banking
Gennaioli, Nicola - 2011
We present a model of shadow banking in which financial intermediaries originate and trade loans, assemble these loans into diversified portfolios, and then finance these portfolios externally with riskless debt. In this model: i) outside investor wealth drives the demand for riskless debt and...
Persistent link: https://www.econbiz.de/10013123980
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Unstable Banking
Shleifer, Andrei - 2010
holdings as collateral. We embed such banks in a stylized financial market, in which securitized loans may be mispriced, and …
Persistent link: https://www.econbiz.de/10013152798
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Liquidity Production in 21st Century Banking
Strahan, Philip E. - 2010
I consider banks' role in providing funding liquidity (the ability to raise cash on demand) and market liquidity (the ability to trade assets at low cost), and how these roles have evolved. Traditional banks made illiquid loans funded with liquid deposits, thus producing funding liquidity on the...
Persistent link: https://www.econbiz.de/10012759533
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Intermediation Variety
Donaldson, Jason Roderick - 2019
We explain the emergence of a variety of intermediaries in a model based only on differences in their funding costs. Banks have a low cost of capital due to, say, safety nets or money-like liabilities. We show, however, that this can be a disadvantage, because it exacerbates...
Persistent link: https://www.econbiz.de/10012868358
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Banks as Secret Keepers
Dang, Tri Vi - 2014
Banks are optimally opaque institutions. They produce debt for use as a transaction medium (bank money), which requires that information about the backing assets - loans - not be revealed, so that bank money does not fluctuate in value, reducing the efficiency of trade. This need for opacity...
Persistent link: https://www.econbiz.de/10013051755
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Intermediary Asset Pricing
He, Zhiguo; Krishnamurthy, Arvind - 2021
We present a model to study the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary. Intermediaries face a constraint on raising equity capital. When the constraint binds, so that intermediaries' equity capital is scarce, risk premia...
Persistent link: https://www.econbiz.de/10013244400