Primary Dealers' Behavior during the 2007-08 Crisis: Part I, Repo Runs

Rajkamal Iyer and Marco Macchiavelli

No 2017-06-22-1, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This is the first of two notes that empirically document the behavior of U.S. Primary Dealers during the 2007-08 financial crisis. In this note we show that dealers' exposure to risky assets drives the observed repo funding squeeze; moreover, as evident from Lehman's experience, we show that repos become subject to counterparty risk during periods of stress, even when collateralized by the safest assets.

Date: 2017-06-22
New Economics Papers: this item is included in nep-fmk and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:2017-06-22-1

DOI: 10.17016/2380-7172.1996

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