Regulation of off-balance sheet exposures and pricing of over-the-counter derivatives
Name
1132234255-MIT.pdf
Size
2.86 MB
Format
Adobe PDF
Checksum (MD5)
9811da03dc7882b6da75ffcc9bfac3b2
Author(s)
Goulding, William, Ph. D. Sloan School of Management.
Advisor(s)
Adrien Verdelhan.
Date Issued
2019
Publisher
Massachusetts Institute of Technology
Abstract
In the post-crisis period substantial attention has been placed on regulation of exposures held off balance sheet by large banks. I analyze the effect on equity holders of such regulation. While requiring banks to hold capital against their on balance sheet exposures largely doses not perturb equity holder valuation capital held against off balance sheet exposures decreases the equity claim by generating a deleveraging effect when the balance sheet is expanded. Shareholders command a premium to compensate for the change in the value of their claim leading to a deviation of prices of redundant derivative claims from their replicating portfolios. Importantly, this effect does not appear under a standard capital ratio.
Description
Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, 2019
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 23-24).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
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