ESBies: safety in the tranches

The euro crisis was fueled by the diabolic loop between sovereign risk and bank risk, coupled with cross-border flight-to-safety capital flows. European Safe Bonds (ESBies), a union-wide safe asset without joint liabilit
The euro crisis was fueled by the diabolic loop between sovereign risk and bank risk, coupled with cross-border flight-to-safety capital flows. European Safe Bonds (ESBies), a union-wide safe asset without joint liability, would help to resolve these problems. We make three contributions. First, numerical simulations show that ESBies would be at least as safe as German bunds and approximately double the supply of euro safe assets when protected by a 30%-thick junior tranche. Second, a model shows how, when and why the two features of ESBies — diversification and seniority — can weaken the diabolic loop and its diffusion across countries. Third, we propose a step-by-step guide on how to create ESBies, starting with limited issuance by public or private-sector entities.
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Metadaten
Author:Markus Konrad Brunnermeier, Sam Langfield, Marco Pagano, Ricardo Reis, Stijn van Nieuwerburgh, Dimitri Vayanos
URN:urn:nbn:de:hebis:30:3-416156
URL:https://ssrn.com/abstract=2848283
DOI:http://dx.doi.org/10.2139/ssrn.2848283
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 537
Series (Serial Number):CFS working paper series (537)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Language:English
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/10/18
Pagenumber:55
HeBIS PPN:390270873
Institutes:Wirtschaftswissenschaften
Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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