Found 27 article(s) for author 'Adi Sunderam'

The Rise and Fall of Securitization

The Rise and Fall of Securitization. Samuel G. Hanson, Adi Sunderam, December 2013, Paper. “The rise and fall of nontraditional securitizations—collateralized debt obligations and mortgage-backed securities backed by nonprime loans—played a central role in the financial crisis. Little is known, however, about the factors that drove the pre-crisis surge in investor demand for these products. Examining insurance companies’ and mutual funds’ holdings of fixed income securities, we find evidence suggesting that both agency problems and neglected risks played an important role…” Link Verified October 11, 2014

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Money Creation and the Shadow Banking System

Money Creation and the Shadow Banking System. Adi Sunderam, December 2013, Paper. “It is widely argued that shadow banking grew rapidly before the recent financial crisis because of rising demand for money-like claims. This paper assesses a key premise of this argument that investors actually treated short-term debt issued by shadow banks as a money-like claim. We present a model where demand for money-like claims is satisfied by deposits, Treasury bills, and shadow bank debt. The model provides predictions about the price quantity dynamics of these claims, as well as the behavior of monetary authority…” Link Verified October 12, 2014

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Are There Too Many Safe Securities? Securitization and the Incentives for Information Production

Are There Too Many Safe Securities? Securitization and the Incentives for Information Production. Samuel Hanson, Adi Sunderam, June 2013, Paper. “We present a model that helps explain several past collapses of securitization markets. Originators issue too many informationally insensitive securities in good times, blunting investor incentives to become informed. The resulting scarcity of informed investors exacerbates market collapses in bad times. Inefficiency arises because informed investors are a public good from the perspective of originators. All originators benefit from the presence of additional informed investors in bad times…” Link verified March 28, 2014

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Concentration in Mortgage Lending, Refinancing Activity, and Mortgage Rates

Concentration in Mortgage Lending, Refinancing Activity, and Mortgage Rates. David S. Scharfstein, Adi Sunderam, June 2013, Paper. “We present evidence that high concentration in local mortgage lending reduces the sensitivity of mortgage rates and refinancing activity to mortgage-backed security (MBS) yields. A decrease in MBS yields is typically associated with greater refinancing activity and lower rates on new mortgages. However, this effect is dampened in counties with concentrated mortgage markets. We isolate the direct effect of mortgage market concentration and rule out alternative explanations based on borrower…” Link Verified October 12, 2014

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An Evaluation of Money Market Fund Reform Proposals

An Evaluation of Money Market Fund Reform Proposals. Samuel Hanson, David S. Scharfstein, Adi Sunderam, April 2013, Paper. “We analyze the leading reform proposals to address the structural vulnerabilities of money market mutual funds (MMFs). We assume that the main goal of MMF reform is safeguarding financial stability. In light of this goal, reforms should reduce the ex ante incentives for MMFs to take excessive risk and increase the ex post resilience of MMFs to system-wide runs. Our analysis suggests that requiring MMFs to have subordinated capital buffers could generate significant financial stability benefits. Subordinated capital provides MMFs…” Link

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Inflation Bets or Deflation Hedges? The Changing Risks of Nominal Bonds

Inflation Bets or Deflation Hedges? The Changing Risks of Nominal Bonds. John Y. Campbell, Adi Sunderam, Luis M. Viceira, January 15, 2013, Paper. “The covariance between U.S. Treasury bond returns and stock returns has moved considerably over time. While it was slightly positive on average in the period 1953–2009, it was unusually high in the early 1980s and negative in the 2000s, particularly in the downturns of 2000–2002 and 2007–2009. This paper specifies and estimates a model in which the nominal term structure of interest rates is driven by four state variables…” Link

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The Economics of Housing Finance Reform

The Economics of Housing Finance Reform. David Scharfstein and Adi Sunderam, August 1, 2011, Paper. “This paper analyzes the two leading types of proposals for reform of the housing finance system: (i) broad-based, explicit, priced government guarantees of mortgage-backed securities (MBS) and (ii) privatization. Both proposals have drawbacks. Properly-priced guarantees would have little effect on mortgage interest rates relative to unguaranteed mortgage credit during normal times, and would expose taxpayers to moral-hazard risk with little benefit…” Link

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