We investigate the channel through which fluctuations in the market liquidity of real-sector repo collateral cause … productive capital as repo collateral to fund the margin for their arbitrage positions. A tiny drop in the market liquidity of … movements and losses. This further reduces the collateral value of arbitrage portfolios and triggers more fire-sales in both …

. Conversely, lack of collateral may prevent them from doing so. We bring evidence from a difference-in-difference approach to shed … light on this central question in corporate hedging theory. We use hand-collected data from the oil and gas industry that … incorporates an exogenous shock that sharply increased the cost of external financing. The evidence supports collateral …