Leverage and Risk Taking under Moral Hazard
نویسندگان
چکیده
Abstract In this paper, I analyze the effectiveness of different capital regulations in mitigating effects moral hazard that exists only for systemically important banks. Leverage restrictions have potential to reduce fraction banks are but do not mitigate those are. Risk adjusted requirements could (of with low leverage) affect (endogenous) systemic risk. A combination both as proposed by Basel III framework can be successful, although under restrictive conditions.
منابع مشابه
Environmental Risk Insurance under Dynamic Moral Hazard∗
A firm is subject to accident risk, which the manager can mitigate by exerting effort. An agency problem arises because effort is unobservable and the manager has limited liability. The occurrence of accidents is modelled as a Poisson process, whose intensity is controlled by the manager. We use martingale techniques to formulate the manager’s incentive compatibility constraints. The optimal co...
متن کاملRediscounting Under Aggregate Risk with Moral Hazard
In a 1999 paper, Freeman proposes a model in which discount window lending and open market operations have different outcomes—an important development because in most of the literature the results of these policy tools are indistinguishable. Freeman’s conclusion that the central bank should absorb losses related to default to provide risk-sharing goes against the concern that central banks shou...
متن کاملIncentives and competition under moral hazard
The work introduces a simple framework to study the relationship between competition and incentives under non-exclusivity. We characterize the equilibria of an insurance market where intermediaries compete over the contracts they offer to a single consumer in the presence of moral hazard. Non-exclusivity is responsible for under-insurance and positive profits in an otherwise competitive set-up....
متن کاملOptimal Risk Sharing in the Presence of Moral Hazard under Market Risk and Jump Risk
This paper provides a tractable framework to study optimal risk sharing between an investor and a firm with general utility forms in the presence of moral hazard under market risk and jump risk. We show that, for a two-date discrete-time moral hazard model, there exists a continuous-time model that obtains the same optimal result. Moreover, we characterize the optimal risk sharing explicitly, i...
متن کاملMoral hazard premium: Valuation of moral hazard under diffusive and jump risks
We provide an equilibrium asset pricing formula under moral hazard on the assumption of a power utility function and an endogenous riskless rate. Moral hazard is defined here as a firm’s change of measure that is incontractible. We show explicitly in closed form that moral hazard distorts asset prices by (1) moving the market price of diffusive risk in the opposite direction to an investor’s ma...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Journal of Financial Services Research
سال: 2021
ISSN: ['0920-8550', '1573-0735']
DOI: https://doi.org/10.1007/s10693-021-00359-8