Why Does Bad News Increase Volatility and Interest Rate, and Decrease Optimism, Asset Prices and Leverage?
2014/04/01
研討會日期 : 2014-04-01
時間 : 14:30
主講人 : Professor Fukuo Albert Wang
地點 : Conference Room B110
演講者簡介 : Professor Wang is currently an Associate Professor at Department of Economics and Finance, University of Dayton. His research fields are Market microstructure, Behavioral finance, Asset pricing, and International finance.
演講摘要 : We view mortgage as a risky derivative of its underlying house collateral and combine no-arbitrage valuation with equilibrium valuation approaches to develop a dynamic model of leverage cycle and interest rate. This model provides a unified explanation to pro-cyclical optimism, asset prices and leverage, and counter-cyclical volatility and interest rate. In addition, the model shows that tightening funding margin in the mortgage securities market dampens optimism, asset prices and leverage, whereas it raises volatility and interest rate in the housing market. Such double leverage cycle leads to more volatile markets and severe leverage cycle, thus resulting in worse financial crises.
