Repo Markets, Counterparty Risk,and the 2007/2008 Liquidity Crisis

A standard repurchase agreement between two counterpartiesis considered to examine the endogenous choice of collateral, the feasibilityof secured lending, and welfare implications of the central bank’s collateralframework. As an important innovation, we allow for two-sided counterpartyrisk. In line with empirical observations, it is shown that the most liquid andleast risky assets are used as collateral in market transactions first.[...]

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Year of publication:	2008-07-01
Authors:	Ewerhart, Christian ; Tapking, Jens
Institutions:	Swiss National Centre of Competence in Research North South <Bern>
Subject:	Kreditrisiko \| Sicherheit \| Security \| Liquidität \| Nutzenmaximierung

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I. The basic model
II. Optimal collateral
III. Feasibility of the market transaction
IV. Central bank collateral and haircuts
V. Welfare implications
VI. Conclusion
Appendix: Proofs
References

Persistent link: https://www.econbiz.de/10005868981