Secondary Market Liquidity and Security Design: Theory and Evidence from ABS Markets
研究在逆向选择下，发行人如何通过分层债务来最小化流动性折价，理论预测流动性随优先级上升，最优分层数随现金流风险增加，并用ABS市场数据验证。
We develop and empirically test a theory of optimal security design under adverse selection accounting for strategic trading by uninformed investors who will liquidate a security in secondary markets only if their idiosyncratic carrying costs exceed the security's expected trading loss. Such investors demand primary market discounts equaling expected carrying costs borne plus trading losses incurred. Issuers minimize the total illiquidity discount by splitting cash-flow into tranched debt claims with liquidity predicted to increase with seniority, while the optimal number of tranches increases with underlying cash-flow risk. Empirical tests confirm our model predictions. Received November 7, 2013; accepted November 14, 2015 by Editor Itay Goldstein.