Safe Assets

The price of a safe asset reflects not only the expected discounted future cash flows but also future service flows, since retrading allows partial insurance of idiosyncratic risk in an incomplete markets setting. This lowers the issuers’ interest burden. As idiosyncratic risk rises during recession...

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Bibliographic Details
Published in:The Journal of political economy 2024-11, Vol.132 (11), p.3603-3657
Main Authors: Brunnermeier, Markus K., Merkel, Sebastian, Sannikov, Yuliy
Format: Article
Language:English
Subjects:
Assets
Debt
Government
Insurance
Public debt
Valuation
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