Repo Runs

Antoine Martin, David Skeie and Ernst-Ludwig von Thadden

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: The recent financial crisis has shown that short-term collateralized borrowing may be a highly unstable source of funds in times of stress. The present paper develops a dynamic equilibrium model and analyzes under what conditions such instability can be a consequence of market-wide changes in expectations. 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; repurchase agreements; tri-party repo; bilateral repo; money market mutual funds; asset-backed commercial paper; bank runs. (search for similar items in EconPapers)
JEL-codes: E44 E58 G24 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-ban, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://epub.ub.uni-muenchen.de/17414/1/448.pdf (application/pdf)

Related works:
Journal Article: Repo Runs (2014)
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)
Working Paper: Repo Runs (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:trf:wpaper:448

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