Repo markets, counterparty risk and the 2007/2008 liquidity crisis

Christian Ewerhart () and Jens Tapking
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Christian Ewerhart: Corresponding author: Institute for Empirical Research in Economics (IEW), Winterthurerstrasse 30, 8006 Zurich, Switzerland., http://www.iew.uzh.ch/index_en.html

No 909, Working Paper Series from European Central Bank

Abstract: A standard repurchase agreement between two counterparties is considered to examine the endogenous choice of collateral assets, the feasibility of secured lending, and welfare implications of the central bank’s collateral framework. As an important innovation, we allow for two-sided counterparty risk. Our findings relate to empirical characteristics of repo transactions and have an immediate bearing on market developments since August 2007. JEL Classification: G21, G32, E51.

Keywords: Counterparty risk; repurchase agreements; collateral; liquidity; haircuts. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2008-06

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