Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148124
Authors: 
Ahnert, Toni
Nelson, Benjamin F.
Year of Publication: 
2016
Series/Report no.: 
Bank of Canada Staff Working Paper 2016-17
Abstract: 
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 to be transparent (opaque) when expected profitability is low (high). Intermediaries with lessvolatile profitability are also more likely to choose to be opaque.
Subjects: 
Financial institutions
Financial stability
JEL: 
G01
G2
Document Type: 
Working Paper

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