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dc.contributor.authorChemla, Gilles
dc.contributor.authorHennessy, Christopher A.
dc.date.accessioned2011-05-20T13:52:31Z
dc.date.available2011-05-20T13:52:31Z
dc.date.issued2011-04
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/6311
dc.language.isoenen
dc.subjectSecurity designen
dc.subjectIssueren
dc.subjectTypeen
dc.subjectPoolingen
dc.subjectSeparatingen
dc.subjectSpeculatoren
dc.subject.ddc332en
dc.subject.classificationjelG21en
dc.subject.classificationjelG32en
dc.titleSecurity Design: Signaling Versus Speculative Marketsen
dc.typeDocument de travail / Working paper
dc.contributor.editoruniversityotherLondon Business School;Royaume-Uni
dc.description.abstractenWe determine optimal security design and retention of asset-backed securities by a privately informed issuer with positive NPV uses for immediate cash. In canonical models, investors revert to prior beliefs if issuers pool at zero-retentions (originate-to-distribute), and separating equilibria are welfare-dominated since separation entails signaling via asset-retention and underinvestment. However, we show speculative markets arise if and only if issuers pool, creating previously overlooked costs. Pooling induces socially costly information acquisition by speculators. Further, in pooling equilibria, issuers never sell safe claims, leaving uninformed investors exposed to adverse selection and distorting risk sharing. In such equilibria, issuers retain zero interest in the asset, and speculator effort is maximized by splitting cash flow into a risky senior ("debt") tranche and residual junior ("equity") claim. Optimal leverage trades off per-unit speculator gains against endogenous declines in uninformed debt trading. Issuer incentives to implement the pooling equilibrium, with distorted risk sharing, are strong precisely when efficient risk sharing, achieved through separation, has high social value. In such cases, a tax on issuer proceeds can raise welfare by encouraging issuer retentions. Taxation dominates mandatory skin-in-the-game as a policy response, since the latter creates gratuitous underinvestment.en
dc.publisher.nameCentre for Economic Policy Researchen
dc.publisher.cityLondresen
dc.identifier.citationpages60en
dc.relation.ispartofseriestitleDISCUSSION PAPER SERIESen
dc.relation.ispartofseriesnumber8336en
dc.description.sponsorshipprivateouien
dc.subject.ddclabelEconomie financièreen


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