Abstract

http://ssrn.com/abstract=2133418
 
 

Citations (11)



 


 



A Model of Shadow Banking


Nicola Gennaioli


Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Andrei Shleifer


Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

April 16, 2012

Chicago Booth Research Paper No. 12-38
Fama-Miller Working Paper

Abstract:     
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 ignore tail risks.

Number of Pages in PDF File: 66

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Date posted: August 21, 2012  

Suggested Citation

Gennaioli, Nicola and Shleifer, Andrei and Vishny, Robert W., A Model of Shadow Banking (April 16, 2012). Chicago Booth Research Paper No. 12-38; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2133418 or http://dx.doi.org/10.2139/ssrn.2133418

Contact Information

Nicola Gennaioli
Bocconi University - Department of Finance ( email )
Via Roentgen 1
Milano, MI 20136
Italy
Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )
Via Roentgen 1
Milan, 20136
Italy
Andrei Shleifer
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-495-5046 (Phone)
617-496-1708 (Fax)
HOME PAGE: http://www.economics.harvard.edu/~ashleife/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Robert W. Vishny (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-702-2522 (Phone)
312-702-0118 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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