Pavlov, AndreyWachter, Susan M2023-05-232023-05-232009-01-012016-06-13https://repository.upenn.edu/handle/20.500.14332/45668In this paper we offer direct evidence that financial intermediation does impact underlying asset markets. We develop a specific observable symptom of a banking system that underprices the put option imbedded in non-recourse asset-backed lending. Using a dataset for 19 countries and over 500 real estate investment trusts, we find that, following a negative demand shock, the “underpricing” economies experience far deeper asset market crashes than economies in which the put option is correctly priced.The final publication is available at Springer via http://dx.doi.org/10.1007%2Fs11146-008-9144-0real estate bubblemortgage lending put optionsAsian financial crisisReal EstateArticle