Bengt Holmstrom, Paul A. Samuelson Professor of Economics
| Jan/14 | Thu | 01:00PM-02:30PM | E51-151 |
Enrollment: Unlimited: No advance sign-up
Money markets are fundamentally different from stock markets. Stock markets are about price discovery for the purpose of allocating risk efficiently. Money markets are about obviating the need for price discovery using over-collateralised debt to reduce the cost of lending. Yet, credit market reforms in the wake of the recent financial crisis often draw on insights grounded in our understanding of stock markets, which can be misleading. The talk provides a perspective on the logic of credit markets and the structure of debt contracts that highlights the information insensitivity of debt. These basic insights into the nature of debt and credit markets are simple but important for thinking about policies on transparency, on capital buffers and other regulatory issues concerning banking and money markets.
Sponsor(s): Economics
Contact: Beata Shuster, E17-201G, 617 253-8883, BSHUSTER@MIT.EDU