Comparative advantages in banking and strategic specialization and diversification
AbstractAbstract This paper shows how banks specialize in different activities when they start with different comparative advantages. The possibility of wrong specialization is shown in a Cournot game with convexities. Different resolution mechanisms are discussed. With risk averse financial intermediaries, excessive diversification is shown to be a problem. Financial innovation like credit derivatives and securitization can mitigate the problem and result in optimal specialization and diversification patterns.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32605.
Date of creation: 31 Dec 2002
Date of revision:
Publication status: Published in Finance, Trade and Development NA.NA(2004): pp. 1-26
Comparative Advantage; Specialization; Diversification;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sherrill Shaffer, 1989. "Pooling intensifies joint failure risk," Working Papers 89-1, Federal Reserve Bank of Philadelphia.
- Mallick, Indrajit, 2004. "Does the Future of the Indian Public Sector Banks lie in Mergers and Acquisitions?," MPRA Paper 32866, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.