Adverse Selection Dynamics in Privately Produced Safe Debt Markets

• 成果类型: Article
• 署名作者: Foley-Fisher, Nathan; Gorton, Gary; Verani, Stephane
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; Yale University; National Bureau of Economic Research
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20210383
• 发表日期: 2024
• 页码: 441-468
• 关键词: bond; QUALITY; prices; ask

摘要

Privately produced safe debt is designed so that there is no adverse selection in trade. But in some macro states-here, the onset of the pandemic-it becomes profitable for some agents to produce private information, and then agents face adverse selection when they trade the debt (i.e., it becomes information sensitive). We empirically study these adverse selection dynamics in a very important asset class, collateralized loan obligations (CLOs), which finance loans to below -investment -grade firms. We decompose the bid -ask spreads on the AAA bonds of CLOs into a component reflecting dealer bank balance sheet costs and the adverse selection component. (JEL D22, D82, E44, G12, G14, G32)