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Guillermo Ordonez on Information Technologies and Safe Assets (joint with Gaetano Gaballo)

Guillermo Ordonez
September 17, 2024
12:20 pm - 1:15 pm
Student Research Workshop

More from this series
Room 108

We show that, although safe assets – in the form of diversified pools of risky assets – are by construction insensitive to information, their quantity is not. Information technologies discourage the sale of the assets underlying the pool by making agents more able to face their own risk and, ex-ante, more exposed to sale price uncertainty. In general equilibrium, sellers do not internalize their social benefit on the supply of safe assets, resulting in an inefficient shortage. Information technologies exacerbate the shortage but improve welfare unless agents heavily rely on risk-selling and data leak to markets.