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    Pooling and tranching under belief disagreement

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    Date Issued
    2019-04-06
    Author(s)
    Ortner, Juan
    Schmalz, Martin C.
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    Permanent Link
    https://hdl.handle.net/2144/38159
    Version
    First author draft
    Citation (published version)
    Juan Ortner, Martin C Schmalz. 2018. "Pooling and Tranching Under Belief Disagreement."
    Abstract
    We study optimal security design when issuer and market participants disagree about the characteristics of the underlying asset. We show that pooling and tranching assets can be preferable to selling optimal securities backed by individual assets: pooling can be a response to belief disagreement between issuer and investors; tranching allows the issuer to exploit belief disagreement among investors. Moreover, differences in beliefs can make pooling and tranching complements; asymmetric information alone cannot.
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    • CAS: Economics: Scholarly Papers [187]
    • BU Open Access Articles [3670]


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