n?u=RePEc:bde:wpaper:1526&r=all

repec.nep.mac

n?u=RePEc:bde:wpaper:1526&r=all

ank is not as cash constrainted as before, diminishing the impact of securitization on the

size of the balance sheet. Thus, the balance sheet expansion as securitization is allowed is

three percentage points smaller under this case than in the benchmark model. Secondly,

for any given increase in the demand for equity and bonds, the resulting change in premia

is smaller. Hence, under this scenario bond and equity premia do not decrease as much

as in the benchmark case. Nonetheless, the introduction of securitization, due to its effect

on cash and risk constraints, leads to lower risk premia.

Figure 10: Sensitivity Analysis

−0.28

Bond Premium − %Change

−0.22

Equity Premium − %Change

−0.24

Bond Premium − %Change

−0.2

Equity Premium − %Change

−0.3

−0.32

−0.24

−0.26

−0.26

−0.28

−0.3

−0.22

−0.24

−0.26

−0.34

−0.28

−0.32

−0.28

−0.3

−0.34

−0.3

−0.36

−0.32

−0.36

−0.32

−0.38

−0.34

−0.38

−0.34

−0.4

0 0.05 0.1 0.15 0.2

Information Asymmetry

−0.36

0 0.05 0.1 0.15 0.2

Information Asymmetry

−0.4

0 0.05 0.1 0.15 0.2

Information Asymmetry

−0.36

0 0.05 0.1 0.15 0.2

Information Asymmetry

0.4

Balance Sheet − %Change

1

Share of Securitized Asset Sold − q

0.4

Balance Sheet − %Change

1

Share of Securitized Asset Sold − q

0.38

0.99

0.39

0.99

0.36

0.98

0.97

0.38

0.98

0.34

0.96

0.37

0.97

0.32

0.95

0.36

0.3

0.28

0.94

0.93

0.92

0.35

0.34

0.96

0.95

0.26

0 0.05 0.1 0.15 0.2

Information Asymmetry

High Variance of Assets

0.91

0 0.05 0.1 0.15 0.2

Information Asymmetry

Benchmark

0.33

0 0.05 0.1 0.15 0.2

Information Asymmetry

Asset Prices less Sensitive to Bank Demand

0.94

0 0.05 0.1 0.15 0.2

Information Asymmetry

Benchmark

(a) High Variance of Assets

(b) Low Price Sensitivity of Demand

−0.3

Bond Premium − %Change

−0.05

Equity Premium − %Change

−0.32

Bond Premium − %Change

−0.3

Equity Premium − %Change

−0.4

−0.1

−0.34

−0.32

−0.15

−0.34

−0.5

−0.2

−0.36

−0.36

−0.6

−0.25

−0.3

−0.38

−0.38

−0.7

−0.35

−0.4

−0.4

−0.8

0 0.05 0.1 0.15 0.2

−0.4

0 0.05 0.1 0.15 0.2

−0.42

0 0.05 0.1 0.15 0.2

Information Asymmetry

−0.42

0 0.05 0.1 0.15 0.2

Information Asymmetry

0.44

Balance Sheet − %Change

1

Share of Securitized Asset Sold − q

0.46

Balance Sheet − %Change

1

Share of Securitized Asset Sold − q

0.42

0.99

0.44

0.99

0.4

0.38

0.98

0.42

0.98

0.97

0.97

0.36

0.4

0.34

0.96

0.96

0.32

0.95

0.38

0.95

0.3

0 0.05 0.1 0.15 0.2

Information Asymmetry

0.94

0 0.05 0.1 0.15 0.2

Information Asymmetry

Reverse Sign of All Correlations Benchmark Reverse the Sign of Credit−Equity Correlations

0.36

0 0.05 0.1 0.15 0.2

Information Asymmetry

Laxer Bank Risk Constraint

0.94

0 0.05 0.1 0.15 0.2

Information Asymmetry

Benchmark

(c) Correlation Structure

(d) Lower Bank Risk Aversion

New Correlation Structure

We perform two sensitivity exercises as regards the correlation structure of returns. In

the first scenario, we reverse the sign of all correlations such that all assets are positively

correlated. In the second scenario we switch the sign of the correlation between credit

BANCO DE ESPAÑA 36 DOCUMENTO DE TRABAJO N.º 1526

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