The phrase "asset substitution" is correct and usable in written English.
It is typically used in financial contexts to describe a situation where a company replaces its assets with riskier ones to benefit from a lower cost of capital.
Example: "The firm's strategy of asset substitution led to increased risk exposure, raising concerns among investors."
Alternatives: "asset replacement" or "asset exchange".
That's because of a little problem called the "asset substitution effect".
There is a trade-off between the tax-debt shield and the utility cost of ex-post asset substitution.
Such securities cannot be replicated by conventional hedging strategies, and they also mitigate the asset substitution problem.
Secondly, managers acting in the best interest of shareholders may give rise to asset substitution by replacing low-risk assets with high-risk investments (Smith and Warner 1979).
Corporate hedging adds value to the firm by lowering the project's risk and accordingly diminishing agency costs which arise from the managerial incentive of asset substitution.
Campbell and Kracaw (1990) additionally contribute that also credible commitments to hedge (for example, obligated hedging of interest rate risks via debt covenants) reduce agency costs of debt by lowering the incentive to asset substitution.
Many CDOs allow for asset substitutions, as Bloomberg's reporting demonstrated so cogently.
On the other hand, several authors have argued that this positive relationship can be explained by the fact that large firms tend to decrease the costs of Agency caused by problems relating to under-investment and to the substitution of assets.
He contrasted it with the actual policy, by which "securities purchases work by affecting the yields on the acquired securities and, via substitution effects in investors; portfolios, on a wider range of assets".
Nowadays, IgG substitution treatments are performed by intravenous (IV) or subcutaneous (SC) infusion that both have assets and drawbacks [15], [17] [19].
Does the substitution matter?
