Barney Hartman-Glaser
Assistant Professor of Finance
Duke University
Fuqua School of Business
Publications
[1] “Optimal Securitization with Moral Hazard” with Tomasz Piskorski and Alexei Tchistyi, Journal of Financial Economics, 104 (2012) 186-202
Abstract: We consider the optimal design of mortgage-backed securities (MBS) in a dynamic setting in which a mortgage underwriter with limited liability can engage in costly hidden effort to screen borrowers and can sell loans to investors. We show that (i) the timing of payments to the underwriter is the key incentive mechanism, (ii) the maturity of the optimal contract can be short, and that (iii) bundling mortgages is efficient as it allows investors to learn about underwriter effort more quickly, an information enhancement effect. Finally, we demonstrate that the optimal contract can be closely approximated by the “first loss piece.”
Working Papers
[2] “Reputation and Signaling” [Substantially Revised!] (2012).
Abstract: Static adverse selection models of security issuance show that informed issuers can perfectly reveal their private information by maintaing a costly stake in the securities they issue. This paper shows that allowing an issuer to both signal current security quality via retention and build a reputation for honesty leads that issuer to misreport quality even when owning a positive stake—the equilibrium is neither separating nor pooling. Although an issuer retains less as reputation improves, prices are u-shaped in reputation because retention is no longer a sufficient statistic for issuer private information.
Works in Progress
[3] “CMBS Subordination Levels and Issuer Reputation” 2011.
[4] “Dynamic Agency, Real Options, and Asset Returns” 2010, with Sebastian Gyrglewicz.