Investor Presentaiton

Banking Theory Based on the Concept of Information Sensitivity Observations and central questions A number of financial products can be considered as privately-produced money like securities (certificates of deposits (CDs), senior MBS tranches, ABCP, repo) Agents accept those "private money” at par when transacting and expect to be able to redeem them at par Demand for higher yields Depositors expect their money back plus interests in future; otherwise, bank run To banks, deposit is their liability, which is supposed to be (almost) risk-free On asset side, loans are risky asset. So how can banks convince depositors their money is safe? Or, the face value of the private money issued by banks is stable?

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