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Security design in non-exclusive markets with asymmetric information

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dc.contributor.author Asriyan, Vladimir
dc.contributor.author Vanasco, Victoria
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2020-05-25T09:27:09Z
dc.date.available 2020-05-25T09:27:09Z
dc.date.issued 2019-11-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1712
dc.identifier.citation
dc.identifier.uri http://hdl.handle.net/10230/44795
dc.description.abstract We revisit the classic problem of a seller (e.g. firm) who is privately informed about her asset and needs to raise funds from uninformed buyers (e.g. investors) by issuing securities backed by her asset cash flows. In our setting, buyers post menus of contracts to screen the seller, but the seller cannot commit to accept contracts from only one buyer, i.e., markets are non-exclusive. We show that an equilibrium of this screening game always exists, it is unique and features semi-pooling allocations for a wide range of parameters. In equilibrium, the seller tranches her asset cash flows into a debt security (senior tranche) and a levered-equity security (junior tranche). Whereas the seller of a high quality asset only issues her senior tranche, the seller of a low quality asset issues both tranches but to distinct buyers. Consistent with this, whereas the senior tranche is priced at pooling valuation, the junior tranche is priced at low valuation. Our theory's positive predictions are consistent with recent empirical evidence on issuance and pricing of mortgage-backed securities, and we analyze its normative implications within the context of recent reforms aimed at enhancing transparency of financial markets.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1712
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Security design in non-exclusive markets with asymmetric information
dc.title.alternative
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2020-05-25T09:26:32Z
dc.subject.keyword adverse slection
dc.subject.keyword security design
dc.subject.keyword non-exclusivity
dc.subject.keyword tranching
dc.subject.keyword liquidity
dc.subject.keyword securitization
dc.subject.keyword transparency
dc.subject.keyword opacity
dc.subject.keyword complexity
dc.subject.keyword market design
dc.subject.keyword regulation
dc.subject.keyword Macroeconomics and International Economics
dc.rights.accessRights info:eu-repo/semantics/openAccess


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