【Macro/Finance webinar】Financial Fragility with Collateral Circulation

  • 研討會日期 : 2021-03-17
  • 時間 : 16:00
  • 主講人 : Professor Vincent Maurin
  • 地點 : online
  • 演講者簡介 : Professor Maurin received his Ph.D. in Economics from European University Institute in 2016. He is currently an Assistant Professor of Finance at the Stockholm School of Economics and a Fellow of the Swedish House of Finance. His research interests are Information Economics, Financial Contracting and Financial Intermediation.
  • 演講摘要 : We present a model of secured credit chains in which the circulation of risky collateral generates fragility. An intermediary stands between an investor and a financier. The intermediary borrows to finance a profitable investment opportunity of his own, subject to a moral hazard problem, and can also intermediate funds. He will only do so if he can re-use the collateral pledged by the investor when borrowing from the financier. We show that when the re-pledged collateral is sufficiently risky and the loans that it secures are recourse, the circulation of collateral generates fragility in the chain, by undermining the intermediary’s incentives. The arrival of news about the value of the re-used collateral further increases fragility. This fragility channel of collateral re-use generates a premium for safe or opaque collateral. The environment considered in our model applies to various situations, such as trade credit chains, securitization and repo markets.