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Marking to Market, Liquidity, and Financial Stability

Abstract : This paper explores the financial stability implications of mark-to market accounting, in particular its tendency to amplify financial cycles and the “reach for yield”. Market prices play a dual role. Not only do they serve as a signal of the underlying fundamentals and the actions taken by market participants, they also serve a certification role and thereby influence these actions. When actions affect prices, and prices affect actions, the loop thus created can generate amplified responses - both in creating bubble-like booms in asset prices, and also in magnifying distress episodes in downturns.
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Preprints, Working Papers, ...
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https://hal-sciencespo.archives-ouvertes.fr/hal-03459036
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Submitted on : Tuesday, November 30, 2021 - 11:06:11 PM
Last modification on : Friday, March 25, 2022 - 3:31:51 AM

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Guillaume Plantin, Haresh Sapra, Hyun Song Shin. Marking to Market, Liquidity, and Financial Stability. 2005. ⟨hal-03459036⟩

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