The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Collateral Constraints and the Law of One Price: An Experiment
Published: 11/2018, Volume: 73, Issue: 6 | DOI: 10.1111/jofi.12722 | Cited by: 17
MARCO CIPRIANI, ANA FOSTEL, DANIEL HOUSER
We test the asset pricing implications of collateralized borrowing (that is, of using assets as collateral to borrow money) in the laboratory. To this purpose, we develop a general equilibrium model with collateral constraints amenable to laboratory implementation and gather experimental data. In the laboratory, assets that can be leveraged fetch higher prices than assets that cannot, even though assets' payoffs are identical in all states of the world. Collateral value, therefore, creates deviations from the Law of One Price. The spread between collateralizeable and noncollateralizeable assets is significant and quantitatively close to theoretical predictions.
Pricing of Climate Risk Insurance: Regulation and Cross‐Subsidies
Published: 3/16/2026, Volume: 81, Issue: 3 | DOI: 10.1111/jofi.70029 | Cited by: 10
SANGMIN S. OH, ISHITA SEN, ANA‐MARIA TENEKEDJIEVA
Homeowners insurance is central to managing the rising losses from climate‐related disasters. We show that insurance premiums are subject to starkly different regulations across states, creating persistent cross‐subsidies and price distortions. We employ states' regulatory rules in an instrumental variable estimation and a border discontinuity design to show insurers do not adjust rates in highly regulated states and compensate by raising rates in less regulated states. Rates and risks diverge in the long run, distorting cross‐state risk‐sharing and increasing insurer exits from highly regulated states. We argue these patterns stem from the interactions between rate regulation and insurers' financing constraints.