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Re-use of collateral : leverage, volatility, and welfare

Brumm, Johannes; Kubler, Felix; Grill, Michael; … - 2017

We assess the quantitative implications of the re-use of collateral on financial market leverage, volatility, and …-use frees up collateral that can be used to back more transactions. Re-use thus contributes to the build-up of leverage and … lead to excessive leverage and lower welfare. So the analysis in this paper provides a rationale for limiting, yet not …

Persistent link: https://www.econbiz.de/10011626567

Asset Pricing with “Buy Now, Pay Later”

Malamud, Semyon; Wang, Neng; Zhang, Yuan - 2022

“Buy Now, Pay Later” (BNPL) and other forms of consumer credit create a wedge between consumption and payments. We introduce this wedge into a standard consumption-based asset pricing model (CCAPM). In equilibrium, the pricing kernel equals the marginal utility of consumption divided by the...

Persistent link: https://www.econbiz.de/10014236310

Rational belief bubbles

Sohn, Hyun-U; Sornette, Didier - 2020

We propose an extension of the class of rational expectations bubbles (REBs) to the more general rational beliefs setting of Kurz (1994a,b). In a potentially non-stationary but stationarizable environment, among an heterogenous population of agents, it is possible to hold more than one...

Persistent link: https://www.econbiz.de/10012181099

Costs and benefits of speculation

Lensberg, Terje; Schenk-Hoppé, Klaus Reiner; Ladley, Dan - 2012

leverage. Results are obtained on the equilibrium properties of portfolio choice, trading activity, market quality and price …

Persistent link: https://www.econbiz.de/10009624599

Patience is a virtue - in value investing

Hens, Thorsten; Schenk-Hoppé, Klaus Reiner - 2018

This note illustrates a simple but important insight for financial investment. In a heterogeneous agent-based evolutionary finance market model with long-lived assets, markets are stable if clients of fundamental ('value') investment funds are more patient than clients of other funds

Persistent link: https://www.econbiz.de/10011899600

Portfolio delegation and market efficiency

Malamud, Semyon; Petrov, Evgeny - 2014

We develop a two-period general equilibrium model of portfolio delegation with competitive, differentially skilled managers and convex compensation contracts. We show that convex incentives lead to significant equilibrium mispricing, but reduce price volatility. In particular, price...

Persistent link: https://www.econbiz.de/10010337960

Price discovery through options

Malamud, Semyon - 2014

How does private information get incorporated into option prices? To study this question, I develop a non-linear, noisy rational expectations equilibrium model with asymmetric information and a full menu of call and put options available for trading. The model allows for an arbitrary...

Persistent link: https://www.econbiz.de/10010412683

Equilibrium driven by discounted dividend volatility

Cvitanić, Jakša; Malamud, Semyon - 2009

We derive representations for the stock price drift and volatility in the equilibrium of agents with arbitrary, heterogeneous utility functions and with the aggregate dividend following an arbitrary Markov diffusion. We introduce a new, intrinsic characteristic of the aggregate dividend process...

Persistent link: https://www.econbiz.de/10003971106

Endogenous completeness of diffusion driven equilibrium markets

Hugonnier, Julien; Malamud, Semyon; Trubowitz, Eugene - 2009

We study the existence of equilibria with endogenously complete markets in a continuous-time, heterogenous agents economy driven by a multidimensional diffusion process. Our main results show that if prices are real analytic as functions of time and the state variables of the model then a...

Persistent link: https://www.econbiz.de/10003971255

Financial markets equilibrium with heterogeneous agents

Cvitanić, Jakša; Jouini, Elyès; Malamud, Semyon; … - 2009

This paper presents an equilibrium model in a pure exchange economy when investors have three possible sources of heterogeneity. Investors may differ in their beliefs, in their level of risk aversion and in their time preference rate. We study the impact of investors heterogeneity on the...

Persistent link: https://www.econbiz.de/10003971310

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