Arbitrage with Production, Collateral Constraint and Heterogeneous Belief

Konferenzbeitrag

We construct a dynamic model economy in which households from segmented markets have varying financial asset demand. Intermediaries make profit by exploiting the price difference in segmented financial markets. However, intermediaries have to separately post their physical investment as collateral to trade. We show that the heterogeneous belief will disturb the intermediaries’ self-recovery process in both financial and real sectors through endogenously determined collateral constraints. The dynamic interaction between belief determined collateral constraint and liquidity supply turns out to be a powerful transmission mechanism by which the effects of shocks persist, amplify and spill over to other sectors.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Financial Frictions ; No. F12-V2

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Financial Crises ; Other Economic Systems: Public Economics; Financial Economics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Zhang, Ally Quan
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145539
• Last update: 10.03.2025, 11:45 AM CET