Marcus M. Opp, Ph.D.

Assistant Professor

Finance Group
UC Berkeley
Haas School of Business

mopp(ät)haas.berkeley.edu

Research Interests:

Corporate Finance, International Finance, Trade Theory, Information Economics

Publications:

"Rybczynski's Theorem in the Heckscher-Ohlin World - Anything Goes", 2009, joint with Hugo Sonnenschein and Christis Tombazos, Journal of International Economics, 79 (1), 137-142.

"Tariff Wars in a Ricardian Model with a Continuum of Goods", 2009, Journal of International Economics (forthcoming).

Most recent papers:

“Rating Agencies in the Face of Regulation - Rating Inflation and Regulatory Arbitrage”, May 2009, joint with Christian C. Opp

This paper develops a rational expectations framework to analyze how rating agencies' incentives are altered when ratings are used for regulatory purposes such as bank capital requirements. Regulations of this kind imply that the AAA label of a security is valuable to a regulated investor independent of the information it provides about the riskiness of the security's underlying cash flows. Our model predicts that a profit maximizing rating agency responds to this regulatory environment by partially inflating the AAA rating class and by reducing information acquisition relative to a (counter-factual) situation without regulation. The equilibrium precision of a rating trades-off two conflicting purposes: (a) the reduction of information asymmetries between issuers and investors, and (b) the support of "regulatory arbitrage". Rating inflation can be related to regulatory changes that increase the sensitivity of regulations to ratings. In our framework the issuer pays model does not cause harm to investors as they rationally anticipate rating inflation and thus the declining quality of AAA-rated securities. Investors are willing to hold such assets at lower premia due to the relative regulatory benefits they provide. Based on our framework we also evaluate the effectiveness of current policy proposals to ban rating contingent fees and reduce rating agencies' market power. Our model predicts that none of these proposals increase the informativeness of ratings.


Other Papers:

“Expropriation Risk and Technology”, Unpublished Dissertation, April 2008

"Biases and Self-Selection: A Theoretical Investigation of the Rothschild-Stiglitz Insurance Model", September 2005

Dissertation Committee:

Additional References :

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