Creator: Atkeson, Andrew, Eisfeldt, Andrea L., and Weill, Pierre-Olivier Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 479 Abstract:
We develop a model of equilibrium entry, trade, and price formation in over-the-counter (OTC) markets. Banks trade derivatives to share an aggregate risk subject to two trading frictions: they must pay a fixed entry cost, and they must limit the size of the positions taken by their traders because of risk-management concerns. Although all banks in our model are endowed with access to the same trading technology, some large banks endogenously arise as “dealers,” trading mainly to provide intermediation services, while medium sized banks endogenously participate as “customers” mainly to share risks. We use the model to address positive questions regarding the growth in OTC markets as trading frictions decline, and normative questions of how regulation of entry impacts welfare.
关键词: Bargaining, Networks, Asset pricing, Trading limits, Welfare, and Entry 学科: G28 - Financial Institutions and Services: Government Policy and Regulation, G20 - Financial Institutions and Services: General, G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors, and L14 - Transactional Relationships; Contracts and Reputation; Networks
Creator: Atkeson, Andrew, Eisfeldt, Andrea L., Weill, Pierre-Olivier, and d'Avernas, Adrien Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 567 Abstract:
Banks' ratio of the market value to book value of their equity was close to 1 until the 1990s, then more than doubled during the 1996-2007 period, and fell again to values close to 1 after the 2008 financial crisis. Sarin and Summers (2016) and Chousakos and Gorton (2017) argue that the drop in banks' market-to-book ratio since the crisis is due to a loss in bank franchise value or profitability. In this paper we argue that banks' market-to-book ratio is the sum of two components: franchise value and the value of government guarantees. We empirically decompose the ratio between these two components and find that a large portion of the variation in this ratio over time is due to changes in the value of government guarantees.
关键词: Risk shifting, Bank valuation, Banking, Bank financial soundness, Bank regulation, and Bank leverage 学科: G28 - Financial Institutions and Services: Government Policy and Regulation, G38 - Corporate Finance and Governance: Government Policy and Regulation, G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages, H12 - Crisis Management, G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, and E44 - Financial Markets and the Macroeconomy
Creator: Atkeson, Andrew, Eisfeldt, Andrea L., and Weill, Pierre-Olivier Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 484 Abstract:
Building on the Merton (1974) and Leland (1994) structural models of credit risk, we develop a simple, transparent, and robust method for measuring the financial soundness of individual firms using data on their equity volatility. We use this method to retrace quantitatively the history of firms’ financial soundness during U.S. business cycles over most of the last century. We highlight three main findings. First, the three worst recessions between 1926 and 2012 coincided with insolvency crises, but other recessions did not. Second, fluctuations in asset volatility appear to drive variation in firms’ financial soundness. Finally, the financial soundness of financial firms largely resembles that of nonfinancial firms.
关键词: Volatility, Credit Risk Modeling, Distance to Default, and Financial Frictions and Business Cycles 学科: E32 - Business Fluctuations; Cycles, G01 - Financial Crises, G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill, and E44 - Financial Markets and the Macroeconomy