IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-21-01077.html
   My bibliography  Save this article

Risk sharing and asset commonality in the financial sector

Author

Listed:
  • Kenta Toyofuku

    (Nihon University)

Abstract

This paper develops a model to explain why asset commonality was pervaded among financial intermediaries before the global financial crisis. We show that when there is a lack of opportunities for financial intermediaries to hedge idiosyncratic shocks, they shift their asset allocation to commonly accessible assets not only to diversify their own portfolios but also to share the risk among themselves. We also show that this asset commonality arises even if the commonly held assets are risky and unproductive. In this sense, asset commonality in the financial sector can mitigate the risk of each financial intermediary but may decrease aggregate output in the economy.

Suggested Citation

  • Kenta Toyofuku, 2022. "Risk sharing and asset commonality in the financial sector," Economics Bulletin, AccessEcon, vol. 42(1), pages 30-40.
    • Handle: RePEc:ebl:ecbull:eb-21-01077
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2022/Volume42/EB-22-V42-I1-P3.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Asset commonality; diversification; risk sharing;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-21-01077. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.