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Interest rates or haircuts? : prices versus quantities in the market for collateralized risky loans
Barsky, Robert B.; Bogusz, Theodore; Easton, Matthew - 2016
) and a specification of the amount of collateral per dollar of lending. The latter is summarized by the margin or "haircut …" associated with the loan. Some key models of endogenous collateral constraints imply that the primary equilibrating force will be … the part of borrowers has profound effects on asset prices. Quantitative analysis of a model of collateral equilibrium …
Persistent link: https://www.econbiz.de/10011569701
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Asset Pricing with Countercyclical Household Consumption Risk
Constantinides, George M. - 2015
We present evidence that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional...
Persistent link: https://www.econbiz.de/10013034190
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Risk Allocation and Financial Intermediation
Goussebaïle, Arnaud - 2021
The classic Arrow-Debreu framework requires a very large number of specific securities to reach Pareto optimality. The present paper shows that financial intermediation can play an important role in maintaining a more parsimonious market framework while still obtaining Pareto optimality. In the...
Persistent link: https://www.econbiz.de/10013212181
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Dynamic Equilibrium with Heterogeneous Agents and Risk Constraints
Prieto, Rodolfo - 2011
We examine the impact of risk-based portfolio constraints on asset prices in an exchange economy. Constrained agents scale down their portfolio and behave locally like power utility investors with risk aversion that depends on current market conditions. The imposition of constraints dampens...
Persistent link: https://www.econbiz.de/10013132941
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Term Risk in Interest Rate Markets
Macrina, Andrea; Mahomed, Obeid - 2021
Based on a stylised financial system along with a systemic perspective thereof, we consider the structure of an aggregated banking system that is vulnerable to liquidity risks. Within this setup, a consistent mathematical modelling framework for term interest rate systems is derived that enables...
Persistent link: https://www.econbiz.de/10013321542
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Collateral Risk, Information Sensitivity, and Default Frictions on Collateralized Debt
Kang, Kee-Youn; Jang, Inkee - 2022
We develop a theory of collateralized debt that emphasizes collateral risk, incentives to acquire information about … collateral, and opportunistic default to study the determinants of the loan size, interest rates, and haircuts. The model … predicts that safe assets are traded without haircuts and that risky collateral tends to be associated with higher interest …
Persistent link: https://www.econbiz.de/10014244957
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UNISWAP : Impermanent Loss and Risk Profile of a Liquidity Provider
Aigner, Andreas A.; Dhaliwal, Gurvinder - 2021
Uniswap is a decentralized exchange (DEX) and was first launched on November 2, 2018 on the Ethereum mainnet [1] and is part of an Ecosystem of products in Decentralized Finance (DeFi). It replaces a traditional order book type of trading common on centralized exchanges (CEX) with a...
Persistent link: https://www.econbiz.de/10013220350
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The COVID-19 Storm and the Energy Sector : The Impact and Role of Uncertainty
Szczygielski, Jan; Brzeszczynski, Janusz; Charteris, Ailie - 2021
Prior research has shown that energy sector stock prices are impacted by uncertainty. The coronavirus (COVID-19) pandemic has given rise to widespread health and economic-related uncertainty. In this study, we investigate the impact and the timing of the impact of COVID-19 related uncertainty on...
Persistent link: https://www.econbiz.de/10013235458
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The financial origins of non-fundamental risk
Acharya, Sushant; Dogra, Keshav; Singh, Sanjay R - 2021
We formalize the idea that the financial sector can be a source of non-fundamental risk. Households' desire to hedge against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices may fall, risk-averse households demand safe assets...
Persistent link: https://www.econbiz.de/10012705247
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Displacement Risk and Asset Returns
Garleanu, Nicolae - 2014
We study asset-pricing implications of innovation in a general-equilibrium overlapping- generations economy. Innovation increases the competitive pressure on existing firms and workers, reducing the profits of existing firms and eroding the human capital of older workers. Due to the lack of...
Persistent link: https://www.econbiz.de/10013067614