Abstract: Gennaioli,Shleifer and Vishny^[1] investigate only one type of investor with local thinking and argue that financial fragility is caused by investors neglecting some risks.However,bonds from credit asset securitization are allowed to be traded by not only institutional investors but also individual investors in China, which is different from the fact of developed capital markets.Different types of investors have great heterogeneity, which may make GSV's model not work in China. Based on the standard model of Gennaioli,Shleifer and Vishny^[1], another model is developted, in which two types of investors who have heterogeneous investor time preferences and who have heterogeneous investor beliefs caused by overconfidence are considered to study the effect of investor irrationality on financial risks. It is found that, contrary to Gennaioli^[1],investor irrationality won't cause banks the overissuance of bonds securitized by credit assets, which provides the theoretical evidence for Chinese government's decision that bonds securitized by credit assets will be traded in the exchange.

Key words: credit asset securitization, heterogeneous investors, financial risk