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SUMMARY:Dynamic asset backed security design - Kathy Yuan\, Professor of F
 inance\, London School of Economics and Political Science
DTSTART:20211102T130000Z
DTEND:20211102T141500Z
UID:TALK166177@talks.cam.ac.uk
CONTACT:Emily Brown
DESCRIPTION:Borrowers obtain liquidity by issuing securities backed by cur
 rent period payoff and resale price of a long lived collateral asset. They
  are privately informed about the payoff distribution. Asset price can be 
 self fulfilling: higher asset price lowers adverse selection\, allows borr
 owers to raise more funding which makes the asset more valuable\, leading 
 to multiple equilibria. Optimal security design eliminates multiple equili
 bria\, improves welfare\, and can be implemented as a repo contract. Persi
 stence in adverse selection lowers debt funding\, generates volatility in 
 asset price\, and exacerbates credit crunch. The theory demonstrates the r
 ole of asset backed securities on the stability of market based financial 
 systems.\n\n\n
LOCATION:Lecture Theatre 1\, Cambridge Judge Business School
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