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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 … for investors in the financially advanced country to invest abroad. Foreign demand for collateral and for collateral …
Persistent link: https://www.econbiz.de/10012962544
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Fund Flows Inducing Mispricing of Risk in Competitive Financial Markets
Stahmer, Axel - 2015
This paper studies the effect of new fund flows on investment behavior and the resulting equilibrium price of risk. The Small Fund Industry model shows equilibria with overinvestment in unprofitable and underinvestment in profitable investment opportunities. The Large Fund Industry model derives...
Persistent link: https://www.econbiz.de/10013011200
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Frontiers of Macrofinancial Linkages
Claessens, Stijn - 2018
The Great Financial Crisis of 2007-09 confirmed the vital importance of advancing our understanding of macrofinancial linkages, the two-way interactions between the real economy and the financial sector. The crisis was a bitter reminder of how sharp fluctuations in asset prices, credit and...
Persistent link: https://www.econbiz.de/10012929483
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Collateralization, Market Incompleteness and Asset Overvaluation
Dow, James - 2016
We study a simple static economy with collateralized loan contracts and an incomplete asset market. We study whether economic forces operate to keep asset price equal to fundamentals in this economy. We find that asset prices may be higher than the valuation of any agent in the economy, i.e.,...
Persistent link: https://www.econbiz.de/10013000446
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Price Discovery in the Small and in the Large : Momentum and Reversal, Bubbles and Crashes
Kedar-Levy, Haim - 2019
A discrete-time dynamic asset-pricing model specifies the economic rationale for a rich array of price dynamics. Two boundedly-rational investors with different risk preferences trade periodically, where excess supply is cleared by a tâtonnement. Cast at the core of asset-pricing modelling,...
Persistent link: https://www.econbiz.de/10012906025
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Pricing and Liquidity in Decentralized Asset Markets
Uslu, Semih - 2019
I develop a search-and-bargaining model of endogenous intermediation in over-the-counter markets. Unlike the existing work, my model allows for rich investor heterogeneity in three simultaneous dimensions: preferences, inventories, and meeting rates. By comparing trading-volume patterns that...
Persistent link: https://www.econbiz.de/10012902875
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Asset Management Contracts and Equilibrium Prices
Buffa, Andrea M - 2019
We derive equilibrium asset prices when fund managers deviate from benchmark indices to exploit noise-trader induced distortions but fund investors constrain these deviations. Because constraints force managers to buy assets that they underweight when these assets appreciate, overvalued assets...
Persistent link: https://www.econbiz.de/10012904735
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Rationality and asset prices under belief heterogeneity
Giachini, Daniele - 2018
In this paper I study the relationship between rationality and asset prices when agents have heterogeneous and incorrect beliefs about future events. Using the fully rational pricing as a benchmark, I show that when agents behave according to the Subjective Generalized Kelly rule (Bottazzi et...
Persistent link: https://www.econbiz.de/10011805975
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Bubbles and Trading Volume
Bidian, Florin - 2015
Rational bubbles in stocks can cause increases in trading volume, even after accounting for their expansionary effect on output and consumption. Trading volume increases are not caused by speculation driven by differences in beliefs. Dividend-bearing assets used to transfer resources...
Persistent link: https://www.econbiz.de/10013033019
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Inefficient Fire-Sales in Decentralized Asset Markets
Ebrahimy, Ehsan - 2019
Classic models of fire-sales that emphasize liquidity-constrained natural buyers can-notfully account for the asset fire-sales during the Financial Crisis of 2008. I present a modelto demonstrate that fire-sales may happen even when there is a sizable pool of naturalbuyers and in the absence of...
Persistent link: https://www.econbiz.de/10012868464