Risk allocation and financial intermediation
نویسندگان
چکیده
The classic Arrow–Debreu framework requires a very large number of specific securities to reach Pareto optimality. present paper shows that financial intermediation can play an important role in maintaining more parsimonious market while still obtaining In the developed, aggregate risk components individual risks are exchanged through highly reduced set nonspecific securities, idiosyncratic insured intermediation. Reaching optimality does not rest on Law Large Numbers approximation. is complementary security derivatives and dynamic trading.
منابع مشابه
The Allocation of Liability: Why Financial Intermediation?
The paper proposes that the organization of nancial markets is decided by the allocation of the liability to repay investors. Based on the liability allocation, the paper examines all possible modes of organizing nance and monitoring in an economy a la Townsend (1979). The equilibrium mode is either Financial Intermediation (FI) where the monitor alone takes the liability, or Conglomeration w...
متن کاملFinancial Intermediation
The savings/investment process in capitalist economies is organized around financial intermediation, making them a central institution of economic growth. Financial intermediaries are firms that borrow from consumer/savers and lend to companies that need resources for investment. In contrast, in capital markets investors contract directly with firms, creating marketable securities. The prices o...
متن کاملFinancial Intermediation, Markets, and Alternative Financial Sectors
We provide a comprehensive review of firms’ financing channels (internal and external, domestic and international) around the globe, with the focus on alternative finance—financing from all the nonmarket, non-bank external sources. We argue that while traditional financing channels, including financial markets and banks, provide significant sources of funds for firms in developed countries, alt...
متن کاملFinancial Intermediation and Macroeconomic Analysis
I ssues relating to fi nancial stability have always been part of the macroeconomics curriculum, but they have often been presented as mainly of historical interest, or primarily of relevance to emerging markets. However, the recent fi nancial crisis has made it plain that even in economies like the United States, signifi cant disruptions of fi nancial intermediation remain a possibility. Under...
متن کاملOnline Appendix Financial Intermediation, International Risk Sharing, and Reserve Currencies
The Brownian motion in equation (1) is defined on a complete probability space and generates a filtration F . Throughout this appendix, “adapted process” means F (t) adapted. Lemma 1. Let me scale all variables by output. Then, given the conjecture that the saver’s value function only depends on scaled deposits and scaled net transfers, U(D̃,Π̃), the optimization problem is solved by the followin...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Mathematical Social Sciences
سال: 2022
ISSN: ['1879-3118', '0165-4896']
DOI: https://doi.org/10.1016/j.mathsocsci.2022.09.004