Trust companies generate leverage cycle dynamics by intermediating less regulated credit to the financial markets in China. We find that the leverage factor constructed from trust companies can explain the time-series and cross-sectional asset returns. The leverage factor derived from securities...

We study the asset pricing in shadow banking where banks with limited commitment provide liquidity to households by issuing collateralized bonds. These bonds earn a liquidity value and the collateral assets earn a collateral value. Both the supply and ownership of collateral matter for its...