Investment Horizon and Repo in the Over‐the‐Counter Market
Hajime Tomura
Journal of Money, Credit and Banking, 2016, vol. 48, issue 1, 145-164
Abstract:
This paper presents a three‐period model featuring a short‐term investor in the over‐the‐counter bond market. A short‐term investor stores cash because of a need to pay cash at some future date. If a short‐term investor buys bonds, then a deadline for retrieving cash lowers the resale price of bonds for the investor through bilateral bargaining in the bond market. Ex‐ante, this hold‐up problem explains the use of a repo by a short‐term investor, the existence of a haircut, and the vulnerability of a repo market to counterparty risk. This result holds without any uncertainty about bond returns or asymmetric information.
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
https://doi.org/10.1111/jmcb.12293
Related works:
Working Paper: Investment Horizon and Repo in the Over-the-Counter Market (2014) 
Working Paper: Investment Horizon and Repo in the Over-the-Counter Market (2013) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:48:y:2016:i:1:p:145-164
Access Statistics for this article
Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West
More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().