Variation Margins, Fire Sales, and Information-constrained Optimality

• 成果类型: Article
• 署名作者: Biais, Bruno; Heider, Florian; Hoerova, Marie
• 署名单位: Hautes Etudes Commerciales (HEC) Paris; European Central Bank
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdaa083
• 发表日期: 2021
• 页码: 2654-2686
• 关键词: Counterparty risk; moral hazard; equilibrium; leverage; debt; economies; MARKETS

摘要

In order to share risk, protection buyers trade derivatives with protection sellers. Protection sellers' actions affect the riskiness of their assets, which can create counterparty risk. Because these actions are unobservable, moral hazard limits risk sharing. To mitigate this problem, privately optimal derivative contracts involve variation margins. When margins are called, protection sellers must liquidate some assets, depressing asset prices. This tightens the incentive constraints of other protection sellers and reduces their ability to provide insurance. Despite this fire-sale externality, equilibrium is information-constrained efficient. Investors, who benefit from buying assets at fire-sale prices, optimally supply insurance against the risk of fire sales.