Understanding the role of debt in the financial system

BIS Working Papers | No 479 | 14 January 2015by Bengt HolmstromPDF full text (1,270kb) | 42 pagesMoney markets are fundamentally different from stock markets. Stock markets are about price discovery for the purpose of allocating risk efficiently. Money markets are about obviating the need for price discovery using over-collateralised debt to reduce the cost of lending.

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