Why does bad news increase volatility and decrease leverage?

DOI10.1016/J.JET.2011.07.001MaRDI QIDQ413491zbMATH OpenOpenAlexFDO

Authors Ana Fostel, John D. Geanakoplos

Publication date 7 May 2012

Published in Journal of Economic Theory (Search for Journal in Brave)

Full work available at URL http://www.imf.org/external/pubs/cat/longres.aspx?sk=24197

zbMATH Keywords

collateralvolatilityvolatility smileVaRendogenous leverage

Mathematics Subject Classification ID

Microeconomic theory (price theory and economic markets) (91B24) Economics of information (91B44) Financial applications of other theories (91G80)

Recommendations

• Leverage causes fat tails and clustered volatility
• Multivariate stochastic volatility, leverage and news impact surfaces
• Defining Bad News: Changes in Return Distributions That Decrease Risky Asset Demand
• More stylized facts of financial markets: leverage effect and downside correlations
• Volume, volatility, and leverage: A dynamic analysis
• Volume, volatility, and public news announcements
• scientific article; zbMATH DE number 1865385
• Financial leverage and market volatility with diverse beliefs
• Why can margin requirements increase volatility and benefit margin constrained investors?

Cites work

• Collateral restrictions and liquidity under-supply: a simple model
• Post-'87 crash fears in the S\&P 500 futures option market
• Regulating collateral-requirements when markets are incomplete
• The Impact of Uncertainty Shocks
• Viable prices in financial markets with solvency constraints
• Why does bad news increase volatility and decrease leverage?

Cited in

(12)

• Introduction to general equilibrium
• Financial leverage and market volatility with diverse beliefs
• Endogenous leverage and asset pricing in double auctions
• Partially revealing rational expectations equilibrium with real assets and binding constraints
• Collateral equilibrium. I: A basic framework
• Why does bad news increase volatility and decrease leverage?
• The effects of dependent beliefs on endogenous leverage
• Why can margin requirements increase volatility and benefit margin constrained investors?
• Debt collateralization, capital structure, and maximal leverage
• Collateral constraints, tranching, and price bases
• Collateralized borrowing and increasing risk
• Volatility smirk as an externality of agency conflict and growing debt

This page was built for publication: Why does bad news increase volatility and decrease leverage?

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q413491)