The delegated portfolio management problem: Reputation and herding

We study the relationship between financial intermediaries’ reputation and herding in a delegated portfolio management problem context. We identify conditions under which equilibria exist such that intermediaries with good reputation invest in private information, whereas those with poor reputation herd. The model’s empirical predictions are discussed and found to be consistent with previous evidence. From a normative stand, our work points out the possible existence of a policy trade-off between protecting investors by demanding more transparency from intermediaries and encouraging herding by free-riders for whom imitating portfolio decisions would be easier under tighter regulation, such as more frequent portfolio disclosure.     

Financial Intermediaries, Markets, and Growth

We build a model in which financial intermediaries provide insurance to households against idiosyncratic liquidity shocks. Households can invest in financial markets directly if they pay a cost. In equilibrium, the ability of intermediaries to share risk is constrained by the market. From a growth perspective, this can be beneficial because intermediaries invest less in the productive technology when they provide more risk-sharing. Our model predicts that bank-oriented economies can grow more slowly than more market-oriented economies, which is consistent with some recent empirical evidence.     

Assessing Systemic Risk Exposure from Banks and GSEs Under Alternative Approaches to Capital Regulation

A key function of capital regulation is to mitigate the potential for systemic financial risk by maintaining public confidence in the ability of regulated market participants to honor their financial obligations in times of market stress. While it is well known that the portfolios of banks and non-banks, especially those intermediaries specializing in mortgage securitization or in specialized mortgage lending, differ in important respects, debate over alternative capital regulations has yet to recognize the implications of these differences, despite the increasing importance of non-bank intermediaries in risk-sharing markets. This paper uses a simple two-date discrete state space exchange economy with opportunities for moral hazard on the part of financial intermediaries to investigate the design of capital regulations to control systemic risk. Holding constant asset risks, we show that intermediaries that issue contingent liabilities may exhibit low or no risk of insolvency while holding significantly less capital than deposit-taking institutions because banks primarily issue claims that promise fixed payments in all states of nature. We also show that, rather than raising capital requirements, the control of systemic risk may involve lowering capital requirements and extending guarantees to liability-holders, without a necessary increase in expected subsidy payments, if such requirements account for shareholder incentives. Specifically, we analyze an example of regulatory policy in which lower capital requirements and an ex post penalty schedule reduce systemic risk by increasing the volume of tradable securities exchanged and by offering a credible mechanism by which intermediaries can signal the true riskiness of their portfolios to liability-holders.     

现代金融中介理论视角下的我国金融体系模式选择

现代金融中介理论表明,商业银行等金融中介与经济增长之间存在密切的相关性。金融中介在促进经济增长的同时,也面临着许多复杂问题。本文从现代金融中介理论的视角出发,对银行导向型金融体系与市场导向型金融体系进行了国际比较,并从融资关系、风险管理、信息生产、公司治理等角度进行对比分析,得出在中国现实的环境下中介与市场发挥着不同作用,但金融中介的优势明显。因此,我国应选择以金融中介为主、资本市场为辅的金融体系,并加紧推出金融机构的混业经营模式。     

Phasing out the GSEs

We develop a new model of the mortgage market that emphasizes the role of the financial sector and the government. Risk tolerant savers act as intermediaries between risk averse depositors and impatient borrowers. Both borrowers and intermediaries can default. The government provides both mortgage guarantees and deposit insurance. Underpriced government mortgage guarantees lead to more and riskier mortgage originations and higher financial sector leverage. Mortgage crises occasionally turn into financial crises and government bailouts due to the fragility of the intermediaries’ balance sheets. Foreclosure crises beget fiscal uncertainty, further disrupting the optimal allocation of risk in the economy. Increasing the price of the mortgage guarantee “crowds in” the private sector, reduces financial fragility, leads to fewer but safer mortgages, lowers house prices, and raises mortgage and risk-free interest rates. Due to a more robust financial sector and less fiscal uncertainty, consumption smoothing improves and foreclosure rates fall. While borrowers are nearly indifferent to a world with or without mortgage guarantees, savers are substantially better off. While aggregate welfare increases, so does wealth inequality.     

Financial intermediation and the supply of liquidity

I study the role of financial intermediaries in supplying liquidity to the real economy. Firms hold liquid assets to meet unanticipated expenses. Financial intermediaries supply liquidity by pooling partially liquid assets, but their ability to commit future funds depends on their capital. When liquidity is scarce, there is a positive liquidity premium and investment is inefficiently low. Bank losses raise the liquidity premium and reduce investment. I analyze the optimal supply of public liquidity and find that when private liquidity is scarce the government should issue bonds for their liquidity properties, providing justification for countercyclical budget deficits.     

Uninsurable risk and financial market puzzles

We compare the empirical performances of three risk-sharing arrangements involving idiosyncratic skill shocks: (a) where individuals are unable to directly insure their consumption against individual-specific shocks, (b) where agents strike long-term insurance contract with financial intermediaries involving a truth revelation constraint as in Kocherlakota and Pistaferri (2009), (c) full risk sharing. Based on the widely accepted assumption of cross-sectional log-normality of individual consumption levels, we work out closed form expressions of the pricing kernels for (a) and (b). We put these three models to test four financial market anomalies, namely the equity premium, currency premium, risk-free rate, and consumption-real exchange rate puzzles simultaneously in an integrated framework. We find that the pricing kernel associated with (a) outperforms the other two models in terms of the produced estimates of the agent’s preference parameters and the model ability to predict the equity and currency premia, the risk-free rate, and the log growth in the exchange rate. However, the predictive ability is still far from satisfactory for all three models under scrutiny.     

Do lack of transparency and enforcement undermine international risk-sharing?

This paper studies the extent to which poor institutions compromise risk-sharing. We model a multilateral organization as a social contract that provides insurance to members. Countries privately observe the realization of a performance variable with a verification cost that differs across countries, reflecting the “transparency” of institutions. When the level of transparency is exogenous, the optimal contract provides complete expected risk sharing across countries and states. Poor transparency and enforcement reduce consumption and result in insurance rationing. When a country can increase transparency endogenously, this generates an externality and moral hazard. We first characterize the outcome when the multilateral agency can influence members’ institutions by choosing the countries’ level of effort. Next we derive a tax/subsidy scheme that can induce countries to choose the socially optimal level. JEL Classification Numbers D8, F3 We are grateful to Biung-Ghi Ju, Ted Juhl, Donald Lien, Joseph Sicilian and Jianbo Zhang for helpful comments. We are especially grateful to an anonymous referee for comments that improved the paper substantially.     

风险分担机制变迁、银行经营模式转型与银行安全

经济全球化过程中,金融市场横向风险分担机制侵蚀了银行中介跨期风险分担机制;一部分资金从银行中介转移到金融市场,致使商业银行传统盈利模式遭受冲击。银行必须从传统的存贷款经营模式转变为参与金融市场和衍生工具交易的、提供综合金融服务的现代经营模式。在这一转型过程中,如果转型过快或者银行不能适应变化,银行体系则可能积累大量风险,并导致银行危机。实证检验结果显示,风险分担机制变迁显著增加了银行危机的概率。     

Neglected risks,financial innovation,and financial fragility

We present a standard model of financial innovation, in which intermediaries engineer securities with cash flows that investors seek, but modify two assumptions. First, investors (and possibly intermediaries) neglect certain unlikely risks. Second, investors demand securities with safe cash flows. Financial intermediaries cater to these preferences and beliefs by engineering securities perceived to be safe but exposed to neglected risks. Because the risks are neglected, security issuance is excessive. As investors eventually recognize these risks, they fly back to the safety of traditional securities and markets become fragile, even without leverage, precisely because the volume of new claims is excessive.     

Financial intermediation in the theory of the risk-free rate

This paper constructs a general equilibrium model of the interaction between financial intermediaries and financial markets that sheds some light on the short-term volatility of real interest rates. The main findings of the paper are as follows. When financial intermediaries issue contingent (non-contingent) liabilities, an increase in the consumers’ relative risk aversion coefficient decreases (increases) the interest rate. Also, the interest rate rises when capitalists are less risk-averse and financial intermediaries are hit by a liquidity shock.     

后金融危机时期的金融创新策略与风险监管

金融创新与金融风险两者之间是一种相互促进、相互发展的关系。金融创新在为转移和分散金融风险做出了巨大贡献的同时也带来了新的风险。后金融危机时期我们不能停止金融创新的步伐,但一方面应注意处理好虚拟经济与实体经济的关系、处理好市场导向与加强监管的关系、处理好交易所市场与场外市场的关系;另一方面应通过实施有效的监管安排来防范和化解市场的宏观风险。     

Banks, markets, and efficiency

A competitive financial system can help reduce banks’ monopoly power and the associated inefficiencies. However, according to Diamond (J Polit Econ 105: 928–956, 1997) and Fecht (J Eur Econ Assoc 6(2), 2004) competition with the financial sector may also constrain the amount of liquidity insurance that banks can provide to households affected by unobservable idiosyncratic liquidity shocks. To study this trade-off, we model competition between banks and between banks and financial markets. Our analysis shows that competition between banks and financial markets can constrain the risk-sharing offered by deposit contracts. This effect is the same if competition between banks mainly affects the reallocation of deposits. However, if banking competition primarily affects new deposits, then such competition only limits inefficient monopoly rents without restraining risk-sharing. We would like to thank Diemo Dietrich, Phil Dybvig, Hans Peter Grüner, Martin Hellwig, Elu von Thadden, Uwe Vollmer, Wolf Wagner as well as seminar participants at the Bundesbank, at the University of Mannheim, at the University of Tilburg, at the 3rd Workshop on Monetary and Financial Economics in Halle, at the University of Lausanne, at the First ProBanker Symposium in Maastricht, at the Global Finance Conference 2005 in Dublin, at the European Economic Association Meeting 2005 in Amsterdam, at the International Finance Conference 2005 in Copenhagen, and at the German Economic Association Meeting 2005 in Bonn. We thank Mike Demott for editorial assistance. The views expressed here are those of the authors and not necessarily those of the Deutsche Bundesbank, the Federal Reserve Bank of New York, or the Federal Reserve System.     

Financial covenants in the markets for public and private debt

The public debt contracts surveyed in Whittred and Zimmer (1986) and Stokes and Tay (1988) were issued between 1962 and 1985, and there has been significant macroeconomic, institutional and regulatory change since that time. We analyse a sample of 36 recently issued Australian public debt contracts and document a considerable change in the ‘package’ of financial covenants used in public debt contracts. The covenant package is now less restrictive and the types of covenants used are more heterogenous. We also survey a sample of 41 recent Australian private debt contracts. These contracts contain a greater number, variety and, collectively, more restrictive set of financial covenants than those public debt contracts we survey, supporting theory which suggests that covenant restrictive and renegotiation–flexible contracts are more suited to borrowers contracting with financial intermediaries in private debt markets. We also note differences in accounting rules associated with financial covenants used in these private debt contracts.     

Nudging the financial market? A review of the nudge theory

A systematic review of the nudge literature and an examination of its applications across different domains reveals that: (i) a nudge, in the sense of using choice architecture to push people to choose desired results, works well; and (ii) a nudge, in the sense of pushing people to choose desired results so that people will be better off, remains questionable. In financial markets, regulators and financial intermediaries currently use nudge theory to: (i) adjust how investment choices are presented to investors; and (ii) provide information in a selective way. Besides nudging investors, it is also possible for regulators to nudge financial intermediaries towards making more ethical decisions.     

在不同融资模式中金融中介的作用分析

如何认识金融中介在不同融资体系的发展?这是把握当前金融机构发展现状与未来趋势所应该搞清的重要问题.本文从两种融资模式的渊源出发,对市场导向的融资体系和银行导向的融资体系中金融中介的作用进行比较分析,并探讨我国融资的发展现状及未来趋势.     

Debt Financing,Corporate Financial Intermediaries and Firm Valuation

In this paper we consider the role of financial intermediaries in the valuation of firms and projects. We show that security prices should reflect both used and unused debt capacity if some corporations can act as financial intermediaries and can capture the tax benefits of debt capacity unused by the operating firm. We also provide some reasons why the value of the firm might be increased if the financing and operating risks of the firm are separated and financial intermediaries issue debt rather than the unit operating the asset.     

Financial globalization, financial crises and contagion

Two observations suggest that financial globalization played an important role in the recent financial crisis. First, more than half of the rise in net borrowing of the U.S. non-financial sectors since the mid-1980s has been financed by foreign lending. Second, the collapse of the U.S. housing and mortgage-backed-securities markets had worldwide effects on financial institutions and asset markets. Using an open-economy model where financial intermediaries play a central role, we show that financial integration leads to a sharp rise in net credit in the most financially developed country and to large asset price spillovers of country-specific shocks to bank capital. The impacts of these shocks on asset prices are amplified by bank capital requirements based on mark-to-market.     

金融发展理论国外研究的最新进展

金融发展理论已经由早期的以新古典经济学为基础的M-S范式经由以内生增长理论为基础的内生金融发展理论发展到以新制度经济学、新政治经济学为基础的新制度金融发展理论。金融发展理论的研究范围已经由发展中国家(或地区)扩展到各种类型的国家(或地区),研究内容从发展中国家如何通过金融深化促进经济增长扩展到金融中介、金融市场如何产生和发展,从发展中国家的金融结构问题扩展到不同金融体系的比较上,从具体的金融机构观扩展到一般的金融功能观,从研究金融发展与经济增长关系这样的显在问题深入到研究金融(自身的)发展规律等潜在问题,进而由仅考虑经济变量扩展到考虑正式制度变量再发展到考虑非正式制度变量,诸如历史、文化、宗教和社会习俗等制度背后更深层面的因素,由把制度变量当作外生变量处理发展到把制度视作经济体系的演化博弈的内生过程。     

货币供应量、利率与银行系统性金融风险——基于CoVaR方法的实证研究

在常态化疫情防控的背景下,商业银行系统性金融风险有上升迹象,这对央行实施货币政策工具和力度的把握提出了更高要求。本文利用条件在险值模型检验了我国货币供应量、利率与银行系统性金融风险的关系。研究结果表明,货币供应量和利率与银行系统性风险之间的关系不是线性的,而是U型的,即存在最优的货币供应量和利率能够使商业银行的系统性金融风险最低。当货币供应量和利率小于这个最优组合时,增加货币供应量和提高利率能够有效降低商业银行的系统性金融风险;而当货币供应量和利率大于这个最优组合时,增加货币供应量和提高利率反而会增加银行系统性金融风险,进而降低商业银行的金融稳定性。