A standard repurchase agreement between two counterparties is considered to examine the endogenous choice of collateral, the feasibility of secured lending, and welfare implications of the central bank's collateral framework. As an innovation, we allow for two-sided counterparty risk. In line...

This paper identifies simple conditions for monotone comparative statics of a unique equilibrium in the Akerlof-Wilson model. Separate conditions apply to trade volume and price. Trade volume increases when supply becomes both stronger and more elastic. In contrast, price decreases when supply...

Interest rate derivatives are among the most actively traded financial instruments in the main currency areas. With values of positions reacting immediately to the underlying index of daily interbank rates, manipulation has become an increasing challenge for the operational implementation of...

A standard repurchase agreement between two counterparties is considered to examinethe endogenous choice of collateral assets, the feasibility of secured lending, and welfare implications of the central bank’s collateral framework. As an important innovation, we allow for two-sided...

In certain market environments, a large investor may benefit from building up a futures position first and trading subsequently in the spot market (Kumar and Seppi, 1992). The present paper identifies a variation of this type of manipulation that might occur in money markets with an interest...

This paper offers a game theoretic model of liquidity provision through repeated central bank tenders, in the spirit of the operational framework of the Eurosystem. Banks are required to satisfy reserve requirements subject to an averaging provision over individual maintenance periods, and...