FRIC/Fiance seminar with Anil K. Kashyap, Chicago Booth

The Department of Finance is proud to announce the upcoming FRIC/Fiance seminar with Professor Anil K. Kashyap, Chicago Booth.

Anil K. Kashyap will present:

Optimal Bank Regulation In the Presence of Credit and Run Risk

Authors:
Anil K. Kashyap, University of Chicago Booth School of Business, United States and Bank of England
Dimitrios P. Tsomocos, Saïd Business School and St. Edmund Hall, University of Oxford
Alexandros P. Vardoulakis, Board of Governors of the Federal Research Bank

ABSTRACT:
We modify the Diamond and Dybvig (1983) model of banking to jointly study various regulations in the presence of credit and run risk. Banks choose between liquid and illiquid assets on the asset side, and between deposits and equity on the liability side. The endogenously determined asset portfolio and capital structure interact to support credit extension, as well as to provide liquidity and risk-sharing services to the real economy. Our modifications create wedges in the asset and liability mix between the private equilibrium and a social planner’s equilibrium. Correcting these distortions requires the joint implementation of a capital and a liquidity regulation.
 

Location:

Solbjerg Plads 3, 2000 Frederiksberg
Room: SPs13