This paper studies a dynamic network economy, where risk averse traders trade multi-laterally over the counter but cannot commit to fulfil their short positions. We show that, although the level of trade is below the first-best, bilateral clearing with collateral can provide an allocation...

We examine the financial stability implications of covered bonds. Banks issue covered bonds by encumbering assets on their balance sheet and placing them within a dynamic ring fence. As more assets are encumbered, jittery unsecured creditors may run, leading to a banking crisis. We provide...

How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt...

How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt...

We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker's choice of risk. Investors are uninformed about investment quality, but a regulator...

How does asset encumbrance affect the fragility of intermediaries subject to rollover risk? We offer a model in which a bank issues covered bonds backed by a pool of assets that is bankruptcy remote and replenished following losses. Encumbering assets allows a bank to raise cheap secured debt...

This paper examines the link between the federal funds and repo markets, before, during, and emerging from the financial crisis that began in August 2007. In particular, the paper investigates the initial transmission of monetary policy to closely related money markets, pricing of risk, and...

We present evidence on the changing dynamics of the yield curve from 1998 to 2011. We identify four different phases. As expected, the financial crisis represents a period of elevated yield volatility, but it can be split into two distinct periods. The split occurs when the Federal Reserve...

This paper examines the interplay between the federal funds and repo markets, two key markets for monetary policy implementation, before, during, and after the financial crisis that began in August 2007. Overall, the results suggest that the federal funds rate communicated policy to the repo...