Shen, Ji, Yan, Hongjun and Zhang, Jinfan (2014) Collateral-motivated financial innovation. Review of Financial Studies, 27 (10). pp. 2961-2997. ISSN 0893-9454
Full text not available from this repository.Abstract
Collateral frictions have a profound effect on our economic landscape, ranging from the design of financial securities, laws, and institutions, to various rules and regulations. We analyze a model with disagreement, where securities and collateral requirements are endogenous. It shows that the security that isolates the variable with disagreement is “optimal” in the sense that alternative securities cannot generate any trading. In an economy with N states, investors may introduce more than N securities, and markets are still incomplete. The model has several novel predictions on the behavior of basis—the spread between the prices of an asset and its replicating portfolio.
| Item Type: | Article |
|---|---|
| Official URL: | http://rfs.oxfordjournals.org/ |
| Additional Information: | © 2014 The Authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions |
| Date Deposited: | 20 Apr 2015 08:31 |
| Last Modified: | 12 Dec 2024 00:45 |
| Funders: | Whitebox Advisors Research Grant |
| URI: | http://eprints.lse.ac.uk/id/eprint/61628 |
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