X hits on this document

74 views

0 shares

0 downloads

0 comments

12 / 29

2a. The 2d“Liquidity Spiralsyle

  • Loss spiral

  • Net wealth >

x

Reduced Positions

for asym. info reasons

  • (constant or increasing leverage ratio)

  • Margin spiral

Initial Losses

Funding Problems

Prices Move Away from Fundamentals

  • toughening of lending standards

  • (forces to delever)

Higher Margins No Rollover

  • Mark-to-market vs. mark-to-model

    • worsens loss spiral

    • improves margin spiral

Losses on Existing Positions

Source: Brunnermeier & Pedersen (2007)

  • Both spirals reinforce each other

Document info
Document views74
Page views74
Page last viewedThu Dec 08 12:41:31 UTC 2016
Pages29
Paragraphs492
Words1533

Comments