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Variation margins, fire sales, and information-constrained optimality

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Personen und Körperschaften: Biais, Bruno (VerfasserIn), Heider, Florian (VerfasserIn), Hoerova, Marie (VerfasserIn)
Titel: Variation margins, fire sales, and information-constrained optimality/ Bruno Biais, Florian Heider, Marie Hoerova
Format: E-Book
Sprache: Englisch
veröffentlicht:
Frankfurt am Main, Germany European Central Bank [2018]
Gesamtaufnahme: Europäische Zentralbank: Working paper series ; no 2191 (October 2018)
Quelle: Verbunddaten SWB
Lizenzfreie Online-Ressourcen
Details
Zusammenfassung: Protection buyers use derivatives to share risk with protection sellers, whose assets are only imperfectly pledgeable because of moral hazard. To mitigate moral hazard, privately optimal derivative contracts involve variation margins. When margins are called, protection sellers must liquidate some of their own assets. We analyse, in a general-equilibrium framework, whether this leads to inefficient fire sales. If investors buying in a fire sale interim can also trade ex ante with protection buyers, equilibrium is information-constrained efficient even though not all marginal rates of substitution are equalized. Otherwise, privately optimal margin calls are ineffciently high. To address this inefficiency, public policy should facilitate ex-ante contracting among all relevant counterparties.
Umfang: 1 Online-Ressource (circa 69 Seiten); Illustrationen
ISBN: 9789289932967
9289932961
DOI: 10.2866/12347