Repo runs

Antoine Martin, David Skeie and Ernst-Ludwig von Thadden

No 444, Staff Reports from Federal Reserve Bank of New York

Abstract: The recent financial crisis has shown that short-term collateralized borrowing may be highly unstable in times of stress. The present paper develops a dynamic equilibrium model and shows that this instability can be a consequence of market-wide changes in expectations, but does not have to be. 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. In particular, our model 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.

Keywords: investment banking; financial fragility; bilateral repo; repurchase agreements; runs; money market mutual funds; asset-backed commercial paper; tri-party repos; securities dealers (search for similar items in EconPapers)
JEL-codes: E44 E58 G24 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2010-04-01
New Economics Papers: this item is included in nep-dge
Note: For a published version of this report, see Antoine Martin, David Skeie, and Ernst-Ludwig von Thadden, "Repo Runs," The Review of Financial Studies 27, no. 4 (2014): 957-89.
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Related works:
Journal Article: Repo Runs (2014)
Working Paper: Repo Runs (2013)
Working Paper: Repo runs (2011)
Working Paper: Repo Runs (2011)
Working Paper: Repo Runs (2010)
Working Paper: Repo Runs (2010)
Working Paper: Repo Runs (2010)
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