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Credit Market Competition and Liquidity Crises

Carletti, Elena; Leonello, Agnese - C.E.P.R. Discussion Papers - 2013

shortage sell loans on the interbank market. Two equilibria emerge. In the no default equilibrium, all banks hold enough … reserves and remain solvent. In the mixed equilibrium, some banks default with positive probability. The former exists when …

Persistent link: https://www.econbiz.de/10011083957

Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk

Heider, Florian; Hoerova, Marie; Holthausen, Cornelia - C.E.P.R. Discussion Papers - 2010

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks' asset risk affects funding liquidity in the interbank market. Several interbank market...

Persistent link: https://www.econbiz.de/10008530367

A Model of Liquidity Hoarding and Term Premia in Inter-Bank Markets

Acharya, Viral V; Skeie, David - C.E.P.R. Discussion Papers - 2011

Financial crises are associated with reduced volumes and extreme levels of rates for term inter-bank transactions, such as in one-month and three-month LIBOR markets. We provide an explanation of such stress in term lending by modelling leveraged banks’ precautionary demand for liquidity. When...

Persistent link: https://www.econbiz.de/10009385771

Firm Default and Aggregate Fluctuations

Jacobson, Tor; Kindell, Rikard; Lindé, Jesper; … - C.E.P.R. Discussion Papers - 2008

This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a multiperiod logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we...

Persistent link: https://www.econbiz.de/10005504257

Securitization, Transparency and Liquidity

Pagano, Marco; Volpin, Paolo - C.E.P.R. Discussion Papers - 2008

We present a model in which issuers of asset backed securities choose to release coarse information to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity or even causing it to freeze. The degree of transparency is inefficiently low if the social...

Persistent link: https://www.econbiz.de/10005504512

Option-Based Credit Spreads

Culp, Christopher L.; Nozawa, Yoshio; Veronesi, Pietro - C.E.P.R. Discussion Papers - 2014

Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We empirically show that indeed portfolios of long Treasuries and short traded put options ("pseudo bonds") closely match the properties of traded corporate bonds. Pseudo bonds...

Persistent link: https://www.econbiz.de/10011145468

Credit Ratings Failures and Policy Options

Pagano, Marco; Volpin, Paolo - C.E.P.R. Discussion Papers - 2009

This paper examines the role of credit rating agencies in the subprime crisis that triggered the 2007-08 financial turmoil. The focus of the paper is on two aspects of ratings that contributed to the boom and bust of the market for asset-backed securities: rating inflation and coarse information...

Persistent link: https://www.econbiz.de/10008558591

A DSGE model of banks and financial intermediation with default risk

Wickens, Michael R. - C.E.P.R. Discussion Papers - 2011

assess and price the risk of default. In order to analyse default risk in the macroeconomy, a simple general equilibrium … model with banks and financial intermediation is constructed in which default-risk can be priced. It is shown how the credit … spread can be attributed largely to the risk of default and how excess loan creation may emerge due different attitudes to …

Persistent link: https://www.econbiz.de/10009293986

Does Interbank Borrowing Reduce Bank Risk?

Dinger, Valeriya; von Hagen, Jürgen - C.E.P.R. Discussion Papers - 2008

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks....

Persistent link: https://www.econbiz.de/10005504249

Financial Integration and Systemic Risk

Fecht, Falko; Grüner, Hans Peter - C.E.P.R. Discussion Papers - 2005

Recent empirical studies criticize the sluggish financial integration in the euro area and find that only interbank money markets are fully integrated so far. This paper studies the optimal regional and/or sectoral integration of financial systems given that integration is restricted to the...

Persistent link: https://www.econbiz.de/10005497717