Regulating Asset Price Risk

Arbeitspapier

There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their tolerance of risk, enables a large increase in asset price risk during a financial panic. We show that a policy that discourages balance sheet risk reduces the magnitude of financial panics, as well as asset price risk in both normal and panic states.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Graduate Institute of International and Development Studies Working Paper ; No. 02/2011

Classification and Topics

• Classification: Wirtschaft ; Financial Markets and the Macroeconomy ; Portfolio Choice; Investment Decisions ; General Financial Markets: Government Policy and Regulation
• Subject: Asset Pricing ; Risk Management ; Leverage ; Portfolio-Management ; Institutioneller Investor ; Spekulation ; Finanzkrise ; Herdenverhalten ; Finanzmarktregulierung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bacchetta, Philippe ; Tille, Cédric ; van Wincoop, Eric
• Event: Veröffentlichung
• (who): Graduate Institute of International and Development Studies
• (where): Geneva
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/77407
• Last update: 10.03.2025, 11:43 AM CET