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Asset Pricing with “Buy Now, Pay Later”

Author

Listed:
  • Semyon Malamud

    (Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute)

  • Neng Wang

    (Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Asian Bureau of Finance and Economic Research (ABFER))

  • Yuan Zhang

    (Shanghai University of Finance and Economics)

Abstract

“Buy Now, Pay Later” (BNPL) and other forms of consumer credit create a wedge between consumption and payments. We introduce this wedge into a standard consumption-based asset pricing model (CCAPM). In equilibrium, the pricing kernel equals the marginal utility of consumption divided by the return on the annuity with BNPL duration. When this duration is stochastic and co-moves with market risk, the BNPLCCAPM pricing kernel can jointly price size- and book-to-market-sorted stock portfolios and maturity-sorted bond portfolios.

Suggested Citation

  • Semyon Malamud & Neng Wang & Yuan Zhang, 2022. "Asset Pricing with “Buy Now, Pay Later”," Swiss Finance Institute Research Paper Series 22-85, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2285
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    More about this item

    Keywords

    asset pricing; yield curve; buy-now-pay-later; consumer credit; financial frictions; credit frictions;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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