Asset Pricing with “Buy Now, Pay Later”

Semyon Malamud, Neng Wang and Yuan Zhang
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Semyon Malamud: Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute
Neng Wang: Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER); Asian Bureau of Finance and Economic Research (ABFER)
Yuan Zhang: Shanghai University of Finance and Economics

No 22-85, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: “Buy Now, Pay Later” (BNPL) and other forms of consumer credit create a wedge between consumption and payments. We introduce this wedge into a standard consumption-based asset pricing model (CCAPM). In equilibrium, the pricing kernel equals the marginal utility of consumption divided by the return on the annuity with BNPL duration. When this duration is stochastic and co-moves with market risk, the BNPLCCAPM pricing kernel can jointly price size- and book-to-market-sorted stock portfolios and maturity-sorted bond portfolios.

Keywords: asset pricing; yield curve; buy-now-pay-later; consumer credit; financial frictions; credit frictions (search for similar items in EconPapers)
JEL-codes: D11 D50 D51 D53 E21 E51 G12 (search for similar items in EconPapers)
Pages: 100 pages
Date: 2022-11
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-upt
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2285

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