Financial Intermediation in the Theory of the Risk-Free Rate
Marini, François (2011), Financial Intermediation in the Theory of the Risk-Free Rate, Journal of Banking and Finance, 35, 7, p. 1663-1668. http/dx.doi.org/10.1016/j.jbankfin.2010.11.009
TypeArticle accepté pour publication ou publié
Journal nameJournal of Banking and Finance
MetadataShow full item record
Abstract (EN)This paper constructs a general equilibrium model of the interaction between financial intermediaries and financial markets that sheds some light on the short-term volatility of real interest rates. The main findings of the paper are as follows. When financial intermediaries issue contingent (non-contingent) liabilities, an increase in the consumers' relative risk aversion coefficient decreases (increases) the interest rate. Also, the interest rate rises when capitalists are less risk-averse and financial intermediaries are hit by a liquidity shock.
Subjects / KeywordsFinancial intermediation; Risk sharing; Risk-free rate; Risk aversion; Liquidity preference; Financial markets
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