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Limits to arbitrage and hedging: Evidence from commodity markets

Acharya, Viral V.; Lochstoer, Lars A.; Ramadorai, Tarun - In: Journal of Financial Economics 109 (2013) 2, pp. 441-465

activity reduces. We conclude that limits to financial arbitrage generate limits to hedging by producers, and affect … producers have hedging demands for commodity futures. Increases in producers' hedging demand or speculators' capital constraints … increase hedging costs via price-pressure on futures. These in turn affect producers' equilibrium hedging and supply decision …

Persistent link: https://www.econbiz.de/10010678703

Counterparty Risk Externality : Centralized Versus Over-the-Counter Markets

Bisin, Alberto - 2011

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that there is "excess leverage" in that parties take on short OTC positions that lead to levels of default...

Persistent link: https://www.econbiz.de/10013128333

Managerial Hedging, Equity Ownership and Firm Value

Acharya, Viral V. - 2008

Suppose risk-averse managers can hedge the aggregate component of their exposure to firm's cash flow risk by trading in financial markets, but cannot hedge their firm-specific exposure. This gives them incentives to pass up firm-specific projects in favor of standard projects that contain...

Persistent link: https://www.econbiz.de/10012728097

Optimal Financial-Market Integration and Security Design

Acharya, Viral V. - 2004

We study two-period pure-exchange Capital Asset Pricing Model (CAPM) economies with incomplete financial markets and …

Persistent link: https://www.econbiz.de/10012785681

Leverage, Moral Hazard and Liquidity

Acharya, Viral V. - 2010

We build a model of the financial sector to explain why adverse asset shocks in good economic times lead to a sudden drying up of liquidity. Financial firms raise short-term debt in order to finance asset purchases. When asset fundamentals worsen, debt induces firms to risk-shift; this limits...

Persistent link: https://www.econbiz.de/10012759652

Managerial Hedging, Equity Ownership, and Firm Value

Acharya, Viral V. - 2009

Persistent link: https://www.econbiz.de/10012765468

Counterparty Risk Externality : Centralized Versus Over-The-Counter Markets

Acharya, Viral V. - 2010

The opacity of over-the-counter (OTC) markets – in which a large number of financial products including credit derivatives trade – appears to have played a central role in the ongoing financial crisis. We model such OTC markets for risk-sharing in a general equilibrium setup where agents...

Persistent link: https://www.econbiz.de/10013146606

Optimal Financial Integration and Security Design

Acharya, Viral V. - 2003

We study two-period pure-exchange Capital Asset Pricing Model (CAPM) economies with a given degree of incompleteness of …

Persistent link: https://www.econbiz.de/10012740731

Counterparty Risk Externality: Centralized Versus Over-the-counter Markets

Acharya, Viral V.; Bisin, Alberto - National Bureau of Economic Research (NBER) - 2011

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to...

Persistent link: https://www.econbiz.de/10009004115

Limits to arbitrage and hedging : evidence from commodity markets

Acharya, Viral V.; Lochstoer, Lars A.; Ramadorai, Tarun - In: Journal of financial economics 109 (2013) 2, pp. 441-465

Persistent link: https://www.econbiz.de/10009784180