Diversification disasters

• 成果类型: Article
• 署名作者: Ibragimov, Rustam; Jaffee, Dwight; Walden, Johan
• 署名单位: University of California System; University of California Berkeley; Harvard University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2010.08.015
• 发表日期: 2011
• 页码: 333-348
• 关键词: FINANCIAL CRISIS; Financial institutions; Systemic risk; Limits of diversification

摘要

The recent financial crisis has revealed significant externalities and systemic risks that arise from the interconnectedness of financial intermediaries' risk portfolios. We develop a model in which the negative externality arises because intermediaries' actions to diversify that are optimal for individual intermediaries may prove to be suboptimal for society. We show that the externality depends critically on the distributional properties of the risks. The optimal social outcome involves less risk-sharing, but also a lower probability for massive collapses of intermediaries. We derive the exact conditions under which risk-sharing restrictions create a socially preferable outcome. Our analysis has implications for regulation of financial institutions and risk management. (C) 2010 Elsevier B.V. All rights reserved.