eprintid: 44280
rev_number: 4
eprint_status: archive
userid: 1482
importid: 105
dir: disk0/00/04/42/80
datestamp: 2022-01-31 10:09:26
lastmod: 2022-01-31 10:09:26
status_changed: 2022-01-31 10:09:26
type: monograph
metadata_visibility: no_search
creators_name: Biais, Bruno
creators_name: Heider, Florian
creators_name: Hoerova, Marie
creators_idrefppn: 031366147
creators_idrefppn: 234070609
creators_halaffid: 1002422;441569
title: Variation margins, fire-sales and information-constrained optimality
ispublished: pub
subjects: subjects_ECO
abstract: In order to share risk, protection buyers trade derivatives with protection sellers. Protection sellers’ actions affect the riskiness of their assets, which can create counter-party risk. Because these actions are unobservable, moral hazard limits risk sharing. To mitigate this problem, privately optimal derivative contracts involve variation mar-gins. When margins are called, protection sellers must liquidate some assets, depressing asset prices. This tightens the incentive constraints of other protection sellers and re-duces their ability to provide insurance. Despite this fire-sale externality, equilibrium is information-constrained efficient. Investors, who benefit from buying assets at fire-sale prices, optimally supply insurance against the risk of fire sales.
date: 2022-01
date_type: published
publisher: TSE Working Paper
official_url: http://tse-fr.eu/pub/126554
faculty: tse
divisions: tse
keywords: variation margins
keywords: fire sales
keywords: pecuniary externality
keywords: moral hazard, con-strained efficiency
keywords: regulation
language: en
has_fulltext: TRUE
subjectsJEL: JEL_D62
subjectsJEL: JEL_D82
subjectsJEL: JEL_G13
subjectsJEL: JEL_G18
view_date_year: 2022
full_text_status: public
monograph_type: working_paper
series: TSE Working Paper
volume: 22-1296
place_of_pub: Toulouse
pages: 59
institution: Université Toulouse 1 Capitole
department: Toulouse School of Economics
book_title: TSE Working Paper
oai_identifier: oai:tse-fr.eu:126554
harvester_local_overwrite: department
harvester_local_overwrite: pending
harvester_local_overwrite: subjectsJEL
harvester_local_overwrite: creators_idrefppn
harvester_local_overwrite: creators_halaffid
harvester_local_overwrite: institution
harvester_local_overwrite: place_of_pub
harvester_local_overwrite: pages
oai_lastmod: 2022-01-27T09:20:37Z
oai_set: tse
site: ut1
citation:   Biais, Bruno <https://www.idref.fr/031366147>, Heider, Florian <https://www.idref.fr/234070609> and Hoerova, Marie  (2022) Variation margins, fire-sales and information-constrained optimality.  TSE Working Paper, n. 22-1296, Toulouse     
document_url: https://publications.ut-capitole.fr/id/eprint/44280/1/wp_tse_1296.pdf