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Repo Runs

Antoine Martin (), David Skeie () and Ernst-Ludwig von Thadden

FMG Discussion Papers from Financial Markets Group

Abstract: This paper develops a dynamic model of financial institutions that borrow short-term and invest into long-term marketable assets. Because such intermediaries performmaturity transformation, they are subject to potential runs. We derive distinct liquidity and collateral constraints that characterize the fragility of such institutions as a result of changing market expectations. The liquidity constraint depends on the intermediary’s endogenous liquidity position that acts as a buffer against runs. The collateral constraint depends crucially on the microstructure of particular funding markets that we examine in detail. In particular, our model provides insights into the fragility and differences of the tri-party repo market and the bilateral repo market that were at the heart of the recent financial crisis.

Date: 2011-07
New Economics Papers: this item is included in nep-ban, nep-dge and nep-fmk
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Related works:
Journal Article: Repo Runs (2014) Downloads
Working Paper: Repo Runs (2013) Downloads
Working Paper: Repo runs (2010) Downloads
Working Paper: Repo Runs (2010) Downloads
Working Paper: Repo Runs (2010) Downloads
Working Paper: Repo Runs (2010) Downloads
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