Erschienen in:Cowles Foundation Discussion Paper ; No. 1903
Umfang:
1 Online-Ressource (40 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.2304196
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 31, 2013 erstellt
Beschreibung:
We show that financial innovations that change the collateral capacity of assets in the economy can affect investment even in the absence of any shift in utilities, productivity, or asset payoffs. First we show that the ability to leverage an asset by selling non-contingent promises can generate over-investment compared to the Arrow-Debreu level. Second, we show that the introduction of naked CDS can generate under-investment with respect to the Arrow-Debreu level. Finally, we show that the introduction of naked CDS can robustly destroy competitive equilibrium