IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/107295.html
   My bibliography  Save this paper

Balance sheet and seniority constraints on the repayment value of claims

Author

Listed:
  • Padellini, Mauro

Abstract

The problem is addressed of how (different types of) funding transactions may affect the repayment value of (credit or equity) claims; to this purpose a novel prove for the existence and uniqueness of the payment vector, which does not make (explicit) use of the fixed point theorem and allows for the presence of claims with different seniorities (i.e. credit and equity claims), is proposed. Different components of the overall displacement (the reduction of repayment value), related to i) seniority structure, ii) network of bilateral exposure and iii) imbalances between external loss and external capital, are calculated by sequentially relaxing different constraints in the mixed linear program used for calculating overall displacement. The possibility that more credit may reduce overall displacement (due to borrowing-from-Peter-to-pay-Paul effect) and more equity capital may on the contrary increase overall displacement (due to its role in the transmission of financial displacement) is exemplified, along with the possible negative dependence of relative displacement (the ratio between overall displacement and total claims) on total claims.

Suggested Citation

  • Padellini, Mauro, 2021. "Balance sheet and seniority constraints on the repayment value of claims," MPRA Paper 107295, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107295
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/107295/1/MPRA_paper_107256.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bordo, Michael D. & Meissner, Christopher M., 2012. "Does inequality lead to a financial crisis?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2147-2161.
    2. Maxwell J. Fry, 1993. "The Fiscal Abuse of Central Banks," IMF Working Papers 1993/058, International Monetary Fund.
    3. Vincenzo Cuciniello & Nicola di Iasio, 2020. "Determinants of the credit cycle: a flow analysis of the extensive margin," Temi di discussione (Economic working papers) 1266, Bank of Italy, Economic Research and International Relations Area.
    4. Spiros Bougheas & Alan Kirman, 2018. "Systemic risk and the optimal seniority structure of banking liabilities," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 23(1), pages 47-54, January.
    5. Aldo Barba & Massimo Pivetti, 2009. "Rising household debt: Its causes and macroeconomic implications--a long-period analysis," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(1), pages 113-137, January.
    6. Bank for International Settlements, 1999. "Implications of repo markets for central banks," CGFS Papers, Bank for International Settlements, number 10, december.
    7. Helmut Elsinger, 2009. "Financial Networks, Cross Holdings, and Limited Liability," Working Papers 156, Oesterreichische Nationalbank (Austrian Central Bank).
    8. Tom Fischer, 2014. "No-Arbitrage Pricing Under Systemic Risk: Accounting For Cross-Ownership," Mathematical Finance, Wiley Blackwell, vol. 24(1), pages 97-124, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Padellini, Mauro, 2022. "Cost coverage in subsistence production and in surplus production," MPRA Paper 113374, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Padellini, Mauro, 2021. "Balance sheet and seniority constraints on the repayment value of claims," MPRA Paper 107256, University Library of Munich, Germany.
    2. Till Treeck, 2014. "Did Inequality Cause The U.S. Financial Crisis?," Journal of Economic Surveys, Wiley Blackwell, vol. 28(3), pages 421-448, July.
    3. Jose Luis Nicolini Llosa, 2015. "Renta financiera y solvencia mundial," Ensayos de Economía 14143, Universidad Nacional de Colombia Sede Medellín.
    4. Glenn Lauren Moore & Engelbert Stockhammer, 2018. "The drivers of household indebtedness reconsidered: An empirical evaluation of competing arguments on the macroeconomic determinants of household indebtedness in OECD countries," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 41(4), pages 547-577, October.
    5. Jakob Korbinian Eberl, 2016. "The Collateral Framework of the Eurosystem and Its Fiscal Implications," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 69.
    6. Christoph Siebenbrunner, 2021. "Quantifying the importance of different contagion channels as sources of systemic risk," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(1), pages 103-131, January.
    7. Nils Bertschinger & Julian Stobbe, 2018. "Systemic Greeks: Measuring risk in financial networks," Papers 1810.11849, arXiv.org.
    8. Giuseppe C. Calafiore & Giulia Fracastoro & Anton V. Proskurnikov, 2022. "Clearing Payments in Dynamic Financial Networks," Papers 2201.12898, arXiv.org, revised May 2022.
    9. Tathagata Banerjee & Zachary Feinstein, 2018. "Pricing of debt and equity in a financial network with comonotonic endowments," Papers 1810.01372, arXiv.org, revised Sep 2021.
    10. Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Society (PKES).
    11. Christoph Siebenbrunner, 2017. "Clearing algorithms and network centrality," Papers 1706.00284, arXiv.org.
    12. Till van Treeck, 2012. "Did inequality cause the U.S. financial crisis?," IMK Working Paper 91-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. Nils Bertschinger & Axel A. Araneda, 2021. "Cross-ownership as a structural explanation for rising correlations in crisis times," Papers 2112.04824, arXiv.org.
    14. Giuseppe Calafiore & Giulia Fracastoro & Anton V. Proskurnikov, 2021. "Optimal Clearing Payments in a Financial Contagion Model," Papers 2103.10872, arXiv.org, revised Feb 2024.
    15. Perugini, Cristiano & Hölscher, Jens & Collie, Simon, 2013. "Inequality, credit expansion and financial crises," MPRA Paper 51336, University Library of Munich, Germany.
    16. Ketelaars, Martijn & Borm, Peter & Herings, P.J.J., 2023. "Duality in Financial Networks," Other publications TiSEM 26750293-9599-4e05-9ae1-8, Tilburg University, School of Economics and Management.
    17. Bilin Neyapti, 2018. "Income distribution and economic crises," International Finance, Wiley Blackwell, vol. 21(3), pages 273-296, December.
    18. Mark Setterfield, 2024. "Managing the Discontent of the Losers Redux: A Future of Authoritarian Neoliberalism or Social Capitalism?," FMM Working Paper 98-2024, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    19. Pablo García S. & Camilo Pérez N., 2017. "Desigualdad, inflación, ciclos y crisis en Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 44(2 Year 20), pages 185-221, December.
    20. Stefano Di Bucchianico, 2020. "A note on financialization from a Classical-Keynesian standpoint," Department of Economics University of Siena 824, Department of Economics, University of Siena.

    More about this item

    Keywords

    Balance sheet; leverage;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:107295. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.