The Private Production of Safe Assets

57 Pages Posted: 12 Jun 2017 Last revised: 23 Feb 2019

See all articles by Marcin T. Kacperczyk

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics; National Bureau of Economic Research (NBER)

Christophe Perignon

HEC Paris - Finance Department

Guillaume Vuillemey

HEC Paris - Finance Department

Multiple version iconThere are 3 versions of this paper

Date Written: February 22, 2019

Abstract

How fragile is the production of safe assets by the private sector? We answer this question using high-frequency data on certificates of deposit (CDs) issued in Europe. We show that only short-term CDs benefit from a safety premium. Using two identification strategies, we further show that the issuance of short-term CDs strongly responds to measures of safety demand. During periods of stress, this relation vanishes. However, high-quality issuers are still able to issue safe assets in periods of stress as investors distinguish between high- and low-quality issuers. Therefore, concerns about externalities arising from private safety production may be partially overstated.

Keywords: Safe assets, Collateral, Short-term debt, Treasuries

JEL Classification: E44, G21

Suggested Citation

Kacperczyk, Marcin T. and Perignon, Christophe and Vuillemey, Guillaume, The Private Production of Safe Assets (February 22, 2019). HEC Paris Research Paper No. FIN-2017-1212. Available at SSRN: https://ssrn.com/abstract=2984146 or http://dx.doi.org/10.2139/ssrn.2984146

Marcin T. Kacperczyk

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Christophe Perignon

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Guillaume Vuillemey (Contact Author)

HEC Paris - Finance Department ( email )

1 rue de la Libération
Paris, Not Applicable 78351
France
+33660204275 (Phone)

HOME PAGE: http://sites.google.com/site/guillaumevuillemey/home

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