The Safe Asset Frontier

Anand, Kartik; Gai, Prasanna

doi:10.2139/ssrn.2515568

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The Safe Asset Frontier

CIFR Paper No. 044/2014

16 Pages Posted: 28 Oct 2014

See all articles by Kartik Anand

Prasanna Gai

University of Auckland Business School; Australian National University (ANU); Bank of England

There are 2 versions of this paper

Date Written: August 27, 2014

Abstract

We identify the frontier between safe and unsafe assets and show how the growth rate of the economy and its fiscal capacity interact with differences of opinion amongst investors to determine the safe asset equilibrium. Multiple equilibria emerge in our set-up due to strategic complementarities across counterparties, and the safety of the bond depends on the extent to which investors’ opinions diverge from the credit rating of the asset.

Keywords: Safe Assets, International Liquidity, Discrete Choice

JEL Classification: E44, D81, F02, F41, G15

Suggested Citation: Suggested Citation

Anand, Kartik and Gai, Prasanna, The Safe Asset Frontier (August 27, 2014). CIFR Paper No. 044/2014, Available at SSRN: https://ssrn.com/abstract=2515568 or http://dx.doi.org/10.2139/ssrn.2515568