Opaque Assets and Rollover Risk

Toni Ahnert & Benjamin Nelson
We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. The endogenous benefit of opacity is lower fragility when profitability is expected to be high. However, the endogenous cost of opacity is a “partial run,” whereby some investors receive bad private signals about profitability and run, even though the intermediary is solvent. We find that intermediaries choose...
This data repository is not currently reporting usage information. For information on how your repository can submit usage information, please see our documentation.