the competitive effects of such policies in two models with different degrees of transparency in the banking sector. Our … and on welfare depend on the transparency of the banking sector. …

This paper studies the implications of opacity in fi nancial markets for investor behavior, asset prices, and welfare …' payo ffs. Consistent with empirical observations, an "opacity price premium" arises: opaque assets trade at a premium over … only transparent (opaque) assets. The opacity price premium incentivizes fi nancial engineers to render transparent assets …

, such as portfolios of subprime mortgages. Interestingly, opacity may be optimal even though it increases informational …