Resumen de Collateral-motivated financial innovation

Ji Shen, Hongjun Yan, Jinfan Zhang

• Collateral frictions have a profound effect on our economic landscape, ranging from the design of financial securities, laws, and institutions, to various rules and regulations. We analyze a model with disagreement, where securities and collateral requirements are endogenous. It shows that the security that isolates the variable with disagreement is �optimal� in the sense that alternative securities cannot generate any trading. In an economy with N states, investors may introduce more than N securities, and markets are still incomplete. The model has several novel predictions on the behavior of basis�the spread between the prices of an asset and its replicating portfolio.