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A Model of Shadow Banking

The Journal of finance (New York), 2013-08, Vol.68 (4), p.1331-1363 [Peer Reviewed Journal]

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Title:
A Model of Shadow Banking
Author: GENNAIOLI, NICOLA ; SHLEIFER, ANDREI ; VISHNY, ROBERT W.
Subjects: Bank liquidity ; Bank loans ; Bank portfolios ; Banking crises ; Banking system ; Debt ; Diversification ; Financial investments ; Financial leverage ; Financial risks ; Financial securities ; Investment risk ; Investors ; Portfolio diversification ; Portfolio management ; Rational expectations ; Risk exposure ; Securitization ; Shadow banking ; Shadow banks ; Studies ; Trade intermediaries
Is Part Of: The Journal of finance (New York), 2013-08, Vol.68 (4), p.1331-1363
Description: We present a model of shadow banking in which banks originate and trade loans, assemble them into diversified portfolios, and finance these portfolios externally with riskless debt. In this model: outside investor wealth drives the demand for riskless debt and indirectly for securitization, bank assets and leverage move together, banks become interconnected through markets, and banks increase their exposure to systematic risk as they reduce idiosyncratic risk through diversification. The shadow banking system is stable and welfare improving under rational expectations, but vulnerable to crises and liquidity dry-ups when investors neglect tail risks.
Publisher: Cambridge: Blackwell Publishing Ltd
Language: English
Identifier: ISSN: 0022-1082
EISSN: 1540-6261
DOI: 10.1111/jofi.12031
CODEN: JLFIAN
Source: Alma/SFX Local Collection

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