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The Economics of Maturity Transformation
Hachem, Kinda Technical Note GEM-0191 / Published August 17, 2021 / 12 pages.
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Product Overview

Few concepts are as important as maturity transformation for understanding financial crises. This technical note guides students through the key mechanisms in the theory using a representative investor, a long-term borrower, and an issuer of shorter-term claims. It then highlights the pervasiveness of maturity transformation in modern financial products. It works well before classes on deposit insurance, bank regulation, the 2008 financial crisis, and/or shadow banking generally.


Learning Objectives

This technical note is designed for an MBA elective on money and banking. It was prepared to serve the following teaching objectives: - Explore how a short-term asset is created from a longer-term one. - Discuss why such maturity transformation may be valuable to investors. - Understand the fundamental fragility that opens the door to crises. - Appreciate the pervasiveness of maturity transformation in the data.

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  • Overview

    Few concepts are as important as maturity transformation for understanding financial crises. This technical note guides students through the key mechanisms in the theory using a representative investor, a long-term borrower, and an issuer of shorter-term claims. It then highlights the pervasiveness of maturity transformation in modern financial products. It works well before classes on deposit insurance, bank regulation, the 2008 financial crisis, and/or shadow banking generally.

  • Learning Objectives

    Learning Objectives

    This technical note is designed for an MBA elective on money and banking. It was prepared to serve the following teaching objectives: - Explore how a short-term asset is created from a longer-term one. - Discuss why such maturity transformation may be valuable to investors. - Understand the fundamental fragility that opens the door to crises. - Appreciate the pervasiveness of maturity transformation in the data.