Asset Pricing with “Buy Now, Pay Later”

100 Pages Posted: 14 Nov 2022

See all articles by Semyon Malamud

Semyon Malamud

Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute

Neng Wang

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Asian Bureau of Finance and Economic Research (ABFER)

Yuan Zhang

Shanghai University of Finance and Economics

Date Written: November 13, 2022

Abstract

“Buy Now, Pay Later” (BNPL) and other forms of consumer credit create a wedge between consumption and payments. We introduce this wedge into a standard consumption-based asset pricing model (CCAPM). In equilibrium, the pricing kernel equals the marginal utility of consumption divided by the return on the annuity with BNPL duration. When this duration is stochastic and co-moves with market risk, the BNPLCCAPM pricing kernel can jointly price size- and book-to-market-sorted stock portfolios and maturity-sorted bond portfolios.

Keywords: asset pricing, yield curve, buy-now-pay-later, consumer credit, financial frictions, credit frictions

JEL Classification: D11, D50, D51, D53, E21, E51, G12

Suggested Citation

Malamud, Semyon and Wang, Neng and Zhang, Yuan, Asset Pricing with “Buy Now, Pay Later” (November 13, 2022). Swiss Finance Institute Research Paper No. 22-85, Available at SSRN: https://ssrn.com/abstract=4276714 or http://dx.doi.org/10.2139/ssrn.4276714

Semyon Malamud (Contact Author)

Ecole Polytechnique Federale de Lausanne ( email )

Lausanne, 1015
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Neng Wang

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4 04-05
1 Business Link
Singapore, 117592
Singapore

Yuan Zhang

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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