Essays in financial economics

The essays in this thesis study the impacts of regulation designed to curtail the accumulation of counterparty credit risk exposure at large banks on intermediation in over-the-counter derivatives markets. In Chapter 1 I analyze the effect on equity holders of regulation focused on exposures held off-balance sheet. While requiring banks to hold capital against their on-balance sheet exposures largely doses not perturb equity holder valuation, capital held against off-balance sheet exposures decreases the equity claim by generating a deleveraging effect when the balance sheet is expanded. Shareholders command a premium to compensate for the change in the value of their claim, leading to a deviation of prices of redundant derivative claims from their replicating portfolios. Importantly, this effect does not appear under a standard leverage ratio.

Name thesis:degree_name

Doctoral

Department dc:contributor.department

Sloan School of Management

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2019

Author dc:creator

• Goulding, William,Ph. D.Massachusetts Institute of Technology.

Advisor dc:contributor.advisor

• Adrien Verdelhan.

• Sloan School of Management.

Statement dc:rights

• MIT theses are protected by copyright. They may be viewed, downloaded, or printed from this source but further reproduction or distribution in any format is prohibited without written permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

https://hdl.handle.net/1721.1/124590

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/124590