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Re-use of collateral: leverage, volatility, and welfare
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| Personen und Körperschaften: | , , , |
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| Titel: | Re-use of collateral: leverage, volatility, and welfare/ Johannes Brumm, Michael Grill, Felix Kübler, Karl Schmedders |
| Format: | E-Book |
| Sprache: | Englisch |
| veröffentlicht: |
Frankfurt am Main, Germany
European Central Bank
[2018]
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| Gesamtaufnahme: |
Europäische Zentralbank: Working paper series ; no 2218 (December 2018)
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| Quelle: | Verbunddaten SWB Lizenzfreie Online-Ressourcen |
| Zusammenfassung: | We assess the quantitative implications of collateral re-use on leverage, volatility, and welfare within an infinite-horizon asset-pricing model with heterogeneous agents. In our model, the ability of agents to reuse frees up collateral that can be used to back more transactions. Re-use thus contributes to the buildup of leverage and significantly increases volatility in financial markets. When introducing limits on re-use, we find that volatility is strictly decreasing as these limits become tighter, yet the impact on welfare is non-monotone. In the model, allowing for some re-use can improve welfare as it enables agents to share risk more effectively. Allowing re-use beyond intermediate levels, however, can lead to excessive leverage and lower welfare. So the analysis in this paper provides a rationale for limiting, yet not banning, re-use in financial markets. |
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| Umfang: | 1 Online-Ressource (circa 42 Seiten); Illustrationen |
| ISBN: |
9789289933230
9289933232 |
| DOI: | 10.2866/909036 |