"[bankers] feared that public sales would produce painfully low prices. That is a valid fear. After all, there are very few investors in the system right now with any appetite or capacity to take risk."
- Investors are irrational and are wrongly avoiding some assets when they could follow the strategy described above
- Most investors actually require zero risk - an extreme case which can only be achieved by 'infinite dilution' of the risky asset, in other words a portfolio fully made up of government debt, with no other components
- There are not enough risk-free assets in the market to dilute the risky assets to the extent that investors demand
- The market underestimates the expected return on the assets
- The assets are not actually underpriced, but correctly reflect the expected return