Author: Bert ScholtensPublisher:
ISBN: 9783902109156
Category : Finance
Languages : en
Pages : 59
Book Description
The Theory of Financial Intermediation
Author: Bert ScholtensPublisher:
ISBN: 9783902109156
Category : Finance
Languages : en
Pages : 59
Book Description
Essays in the Theory of Financial Intermediation
Author: Nathalie RossienskyEssays on the Theory of Financial Intermediation
Author: Michel de LangePublisher:
ISBN:
Category : Credit
Languages : en
Pages : 140
Book Description
Essays on Financial Intermediation
Author: Igor SalitskiyPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
This dissertation consists of three studies. In the first study I This paper extends the costly state verification model from Townsend (1979) to a dynamic and hierarchical setting with an investor, a financial intermediary, and an entrepreneur. Such a hierarchy is natural in a setting where the intermediary has special monitoring skills. This setting yields a theory of seniority and dynamic control: it explains why investors are usually given the highest priority on projects' assets, financial intermediaries have middle priority and entrepreneurs have the lowest priority; it also explains why more cash flow and control rights are allocated to financial intermediaries if a project's performance is bad and to entrepreneurs if it is good. I show that the optimal contracts can be replicated with debt and equity. If the project requires a series of investments until it can be sold to outsiders, the entrepreneur sells preferred stock (a combination of debt and equity) each time additional financing is needed. If the project generates a series of positive payoffs, the entrepreneur sells a combination of short-term and long-term debt. In the second study I I study optimal government interventions during asset fire sales by banks. Fire sales happen when a large portion of banks receive liquidity shocks. This depletes bank balance sheets directly and indirectly because these assets are used as collateral. The government can respond by buying distressed assets or buying stock from banks. Stock purchases do not deprive banks of collateral, but may have a lower effect on asset prices. The optimal policy depends on the elasticity of asset prices to asset supply and the amount of assets held by banks. Calibration to the recent financial crisis is provided. In the third study conducted with Attila Ambrus and Eric Chaney we use ransom prices and time to ransom for over 10,000 captives rescued from two Barbary strongholds to investigate the empirical relevance of dynamic bargaining models with one-sided asymmetric information in ransoming settings. We observe both multiple negotiations that were ex ante similar from the uninformed party's (seller's) point of view, and information that only the buyer knew. Through reduced-form analysis, we test some common qualitative predictions of dynamic bargaining models. We also structurally estimate the model in Cramton (1991) to compare negotiations in different Barbary strongholds. Our estimates suggest that the historical bargaining institutions were remarkably efficient, despite the presence of substantial asymmetric information.
Essays on Financial Intermediation and Development
Author: Gabriel De Abreu MadeiraPublisher:
ISBN: 9780549016267
Category : Intermediation (Finance)
Languages : en
Pages : 270
Book Description
This thesis applies contract theory to topics of financial intermediation. Chapter 1 studies the effects of imperfect legal enforcement on optimal project financing contracts. It departs from an environment that combines asymmetric information about cash flows and limited commitment by borrowers. Incentive for repayment comes from the possibility of liquidation of projects by a court, but courts are costly and may fail to liquidate. These ingredients make it possible to evaluate how interest rates and amounts of credit respond jointly to variations in the reliability of courts. Examples reveal that costly use of courts may be optimal, but both asymmetric information and uncertainty about courts are necessary conditions for legal punishments ever to be applied. Numerical solutions for several parameterizations show wealthier individuals borrowing with lower interest rates and running higher scale enterprises, which is consistent with stylized facts. High reliability of courts has a consistently positive effect on investment. However its effect on interest rates is subtler and depends essentially on the degree of curvature of the production function.
Essays in Financial Intermediation
Author: Ping HeThree Essays on Financial Intermediation
Author: Didier CossinPublisher:
ISBN:
Category : Intermediation (Finance)
Languages : en
Pages : 412
Book Description
Essays in Financial Intermediation
Author: Steven DruckerEssays on Financial Intermediation
Author: Gabriel AsafteiPublisher:
ISBN: 9780496145478
Category : Banks and banking
Languages : en
Pages :
Book Description
Essays on Banking and Financial Intermediation
Author: Yuteng Cheng (Ph.D.)Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Chapter 1 uses a mix of theory and data to study the unintended consequences of mandatory retention rules in securitization. The Dodd-Frank Act and the EU Securitization Regulation both impose a 5% mandatory retention requirement in securitization to motivate financial intermediaries to screen and monitor their borrowers more carefully. To better understand the impact of the policy, this chapter studies two related research questions. First, can mandatory retention have unintended consequences? Second, is the current level of retention optimal? To answer those questions, I propose a novel trade-off model in which retention strengthens monitoring but may also encourage banks to shift risk. I go on to provide empirical evidence supporting this unintended consequence: in the data, banks shifted toward riskier portfolios after the implementation of the retention rules embedded in Dodd-Frank. Furthermore, the model provides clear testable predictions about policy and corresponding consequences. I show in the data that stricter retention rules caused banks to monitor and shift risk simultaneously. According to the model prediction, such a simultaneous increase can only occur when the retention level is above optimal, which suggests that the current rate of 5% in the US is too high. Chapter 2Chapter 2 studies the source of fragility of OTC-natured interbank markets. Most research on the fragility of interbank markets -in the sense of multiplicity of equilibria driven by adverse selection-relies on a competitive market structure. By contrast, this chapter accounts for the OTC market nature and the market power of some players. Under adverse selection alone, markets are not fragile; that is, the equilibrium is unique. However, when adverse selection is combined with moral hazard on the borrowers' side, multiple equilibria arise again, and the bad equilibrium exhibits troubled banks gambling for resurrection. An interest rate floor eliminates the bad equilibrium. More generally, policies to reduce fragility should address moral hazard rather than adverse selection. Chapter 3Chapter 3 studies the contracting differences between corporate loans that are sold in the secondary market and that are securitized in the CLO market. With secondary loan sales and CLO markets being the two markets for corporate loan commoditization, empirical studies find that banks add additional restrictive covenants to loans sold and looser covenants to loans securitized. Why is it so? This chapter builds a theoretical model to explain such contracting differences in these two markets. The key mechanism is that the bank alleviates the borrowers' moral hazard problem via public monitoring and charges higher interest rates due to the relaxing of incentives provided. Those high interest rates facilitate loan sales because the information problem embedded in loan sales is lessened. In contrast, adverse selection is less severe in securitization since the bank retains the information-sensitive tranche.