Seminar Series

2021 - 2022

Speaker: Elena Asparouhova (U of Utah).

Title: “The Role of Financial Markets in Mitigating Credit Market Bubbles”

joint with Peter Bossaerts (U of Melbourne and U of Cambridge), Dan Lu (U of Melbourne) and Anh Tran (U of Connecticut)

Date: Thursday, February 10th at 12h30 (Paris Time).

Abstract: We investigate how long an insolvent debtor can avoid default when survival makes creditors collectively better off, but individual creditors can gain by forcing early repayment at face value. Theory predicts that the ability to trade the debt in a competitive market causes immediate default. With 24 experimental sessions involving over 400 participants across three continents, we show that the debtor can survive longer than predicted by theory, with or without markets in its debt. When there are markets, prices do not reveal the length of survival, but correlate with the effective payoffs. Creditor mistakes alone do not explain the survival. Collectively, creditors are better off with than without markets, but markets exacerbate wealth inequality. Short-sellers tend to be among the highest earners, but long-only strategies are not uniformly undesirable. Debtor survival length is reduced upon repetition with the same cohort. However, when new creditors are allowed in the pool of existing creditors, survival length remains constant, even if the newcomers have access to the entire default history.

You will find the paper attached. Bio: Here is a link to the speaker’s website

https://uleef.business.utah.edu/newsite/elenapage.html

You are cordially invited to participate to the seminar, which will take place in Room 327, Lascrosses building, if the sanitary situation permits it.

For those who will not be in the room, please find the zoom link below:

https://tbs-education-fr.zoom.us/j/85971576688?pwd=Y0ZtRkVFT3VyVVdCMk1mbWlTakpTUT09

Meeting ID: 859 7157 6688  Passcode: 139136

If the sanitary situation does not permit the seminar to take place in presence, it will take place online and you will receive a mail announcing it beforehand.

For more information, please contact: Pierre Mella-Barral p.mella-barral@tbs-education.fr