Neglected risks,financial innovation,and financial fragility |
| |
Authors: | Nicola Gennaioli Andrei Shleifer Robert Vishny |
| |
Institution: | 1. Centre de Recerca en Economia International (CREI), Spain;2. Universitat Pompeu Fabra (UPF), Spain;3. Harvard University, Department of Economics, United States;4. National Bureau of Economic Research (NBER), United States;5. University of Chicago, Booth School of Business, United States |
| |
Abstract: | 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. |
| |
Keywords: | E44 G01 G21 G32 |
本文献已被 ScienceDirect 等数据库收录! |
|