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Martin, Antoine, Skeie, David and Thadden, Ernst-Ludwig von (2014) Repo runs. Review of Financial Studies, 27 (4). pp. 957-989. doi:10.1093/rfs/hht134 ISSN 0893-9454.
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Official URL: http://dx.doi.org/10.1093/rfs/hht134
Abstract
The recent financial crisis has shown that short-term collateralized borrowing may be a highly unstable source of funds in times of stress. In this paper, we develop a dynamic equilibrium model and analyze under what conditions such instability can be a consequence of market-wide changes in expectations. We derive a liquidity constraint and a collateral constraint that determine whether such expectations-driven runs are possible and show that they depend crucially on the microstructure of particular funding markets that we examine in detail. This provides insights into the differences between the tri-party repo market and the bilateral repo market, which were both at the heart of the recent financial crisis.
| Item Type: | Journal Article | ||||||
|---|---|---|---|---|---|---|---|
| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Journal or Publication Title: | Review of Financial Studies | ||||||
| Publisher: | Oxford University Press | ||||||
| ISSN: | 0893-9454 | ||||||
| Official Date: | April 2014 | ||||||
| Dates: |
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| Volume: | 27 | ||||||
| Number: | 4 | ||||||
| Page Range: | pp. 957-989 | ||||||
| DOI: | 10.1093/rfs/hht134 | ||||||
| Status: | Peer Reviewed | ||||||
| Publication Status: | Published | ||||||
| Access rights to Published version: | Restricted or Subscription Access |
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