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The Market For Subprime Lending: A Law And Economics Analysis Of Market Failures And Policy Responses, Diego Valiante
The Market For Subprime Lending: A Law And Economics Analysis Of Market Failures And Policy Responses, Diego Valiante
Diego Valiante
Subprime mortgages represent a relevant wealth accumulation tool for low-income borrowers, and may promote efficient social policies. However, as recently brought to attention by the financial crisis, origination and distribution services are affected by strong information asymmetries and cognitive biases (rational and irrational). The failure of the subprime mortgages market was triggered by a mixture of irrational and opportunistic behaviours, as well as a lack of regulation, supervision and efficient disclosure. This paper, therefore, sheds lights on four areas of this market, highlighting causes and proposing remedies to structural failures. Therefore, the paper discusses: the financial architecture of the subprime …
Shaping Reforms And Business Models For The Otc Derivatives Market. Quo Vadis?, Diego Valiante
Shaping Reforms And Business Models For The Otc Derivatives Market. Quo Vadis?, Diego Valiante
Diego Valiante
Regulators around the globe are setting new strategies to deal with the systemic importance of the €427 trillion ($604 trillion) over-the-counter (OTC) derivatives market. This paper explores the three major sources of disruptive effects in OTC derivatives: liquidity, counterparty risk and legal uncertainty. The author highlights risks that may affect the value chain of a derivative transaction and weaken the economic and legal rationales that justify their widespread use. On the policy side, commitments have been made at G-20 level to draft uniform rules on a global scale “to build a safer financial system”. This paper finds, however, that in …