Asset Commonality, Debt Maturity and Systemic Risk

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Show simple item record ALLEN, Franklin BABUS, Ana CARLETTI, Elena 2011-03-08T09:54:09Z 2011-03-08T09:54:09Z 2010
dc.description.abstract We develop a model where financial institutions swap projects in order to diversify their individual risk. This can lead to two dfferent asset structures. In a clustered structure groups of financial institutions hold identical portfolios and default together. In an unclustered structure defaults are more dispersed. With long term finance welfare is the same in both structures. In contrast, when short term finance is used, the network structure matters. Upon the arrival of a signal about banks’ future defaults, investors update their expectations of bank solvency. If their expectations are low, they do not roll over the debt and all institutions are early liquidated. We compare investors’rollover decisions and welfare in the two asset structures. en
dc.language.iso en en
dc.relation.ispartofseries Wharton Financial Institutions Center en
dc.relation.ispartofseries 2010/30 en
dc.title Asset Commonality, Debt Maturity and Systemic Risk en
dc.type Working Paper en
dc.neeo.contributor ALLEN|Franklin|aut|
dc.neeo.contributor BABUS|Ana|aut|
dc.neeo.contributor CARLETTI|Elena|aut|EUI70001

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