Do Accounting Measurement Regimes Matter? A Discussion of Mark-to-Market Accounting and Liquidity Pricing
17 Pages Posted: 30 Jul 2008 Last revised: 21 Sep 2008
Date Written: September 16, 2007
Using a model with banking and insurance sectors, Allen and Carletti show that marking-to-market interacts with liquidity pricing to exacerbate the likelihood of financial contagion between the two sectors. In this discussion, I lay out the main ingredients of their model and explain how they interact with liquidity pricing to generate financial contagion. I then discuss some limitations of their model and propose an interesting extension.
Keywords: Mark-to-Market, Historical Cost, Liquidity Pricing, Accounting Measurement
JEL Classification: D52, G12, G21, G22, M41, M44
Suggested Citation: Suggested Citation