Arbeitspapier
Fragility of secured credit chains
We present a model of secured credit chains in which assets generated from intermediation activity and pledged as collateral create fragility. A dealer stands between a borrower and a financier. The dealer borrows from the financier to fund her project, subject to a moral hazard problem, In addition, the dealer can intermediate between the financier and the borrower, forming a credit chain. Intermediation profits can thus act as collateral for the loan to fund the dealer's own project. When these profits are risky, however, using them as collateral may undermine the dealer's incentives, generating fragility in the chain. The arrival of news about the value of the revenue of the intermediation activity further increases fragility. This fragility channel generates a premium for safe or opaque collateral. The environment considered in our model applies to various situations, such as trade credit chains, securitization and repo markets.
- Sprache
-
Englisch
- Erschienen in
-
Series: Discussion Papers ; No. 23-04
- Klassifikation
-
Wirtschaft
Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Corporate Finance and Governance: General
- Thema
-
Collateral
Secured Lending
Intermediation
Fragility
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Gottardi, Piero
Maurin, Vincent
Monnet, Cyril
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Bern, Department of Economics
- (wo)
-
Bern
- (wann)
-
2023
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:46 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Gottardi, Piero
- Maurin, Vincent
- Monnet, Cyril
- University of Bern, Department of Economics
Entstanden
- 2023
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