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SUMMARY:Mortgage Loan-Flow Networks and Financial Norms
DTSTART:20161028T103000
DTEND:20161028T120000
DTSTAMP:20260428T073056Z
UID:d01fdfb88acc653c7b2943083e0e4b82f333d8d02e2398c6faeb694a
CATEGORIES:Conferences - Seminars
DESCRIPTION:Johan WALDEN (Haas School of Business at Berkeley)\nWe develop
  a theoretical model of a network of intermediaries\, which gives rise to 
 heterogeneous financial norms and systemic vulnerabilities. The optimal be
 havior of each intermediary regarding its attitude toward risk\, the quali
 ty of the projects that it undertakes\, and the intermediaries it chooses 
 to interact with\, is influenced by the behavior of its counterparties. Th
 ese strategic network effects influence the financial strength and systemi
 c vulnerability of individual intermediaries\, as well as in aggregate\, b
 eyond the direct network effects of shock propagation that have been previ
 ously studied. The behavior of a subset of intermediaries has a disproport
 ionately large effect on the network\; these nodes may be regarded as too 
 pivotal to fail. We apply the model to the mortgage-origination and securi
 tization network of financial intermediaries in the U.S.\, using a data se
 t containing all of the more than one million private-label\, fixed-rate m
 ortgages originated and securitized in 2006 and 2007\, for which we track 
 the ex-post default performance using loan flows to define linkages. We fi
 nd that default risk was closely related to network position and evolved i
 n a predictable manner among linked nodes. This suggests that network effe
 cts are of vital importance in the U.S. mortgage market.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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