Showing 1 - 10 of 79
I develop a macroeconomic model with a financial sector, in which banks can finance risky projects (loans) and can affect their quality by exerting a costly screening effort. Informational frictions regarding the observability of loan characteristics limit the amount of external funds that banks...
Persistent link: https://www.econbiz.de/10013023812
This paper presents a model of repo rehypothecation in which dealers intermediate funds and collateral between cash lenders (e.g., money market funds) and prime brokerage clients (e.g., hedge funds). Dealers take advantage of their position as intermediaries, setting different repo terms with...
Persistent link: https://www.econbiz.de/10013023815
Focusing on downgrades as stress events that drive the selling of corporate bonds, we document that the illiquidity of stressed bonds has increased after the Volcker Rule. Dealers regulated by the Rule have decreased their market-making activities while non-Volcker-affected dealers have stepped...
Persistent link: https://www.econbiz.de/10011579150
Leveraged term loans are typically arranged by banks but distributed to institutional investors. Using novel data, we find that to elicit investors' willingness to pay, arrangers expose themselves to pipeline risk: They have to retain larger shares when investors are willing to pay less than...
Persistent link: https://www.econbiz.de/10014121670
In its complexity and its vulnerability to market volatility, the CPDO might be viewed as the poster child for the excesses of financial engineering in the credit market. This paper examines the CPDO as a case study in model risk in the rating of complex structured products. We demonstrate that...
Persistent link: https://www.econbiz.de/10013118453
What are the consequences of a potential fire sale stemming from the exemption of repurchase agreements (repos) from automatic stay? This paper shows that repo's exemption from stay alters firms' financing and investment decisions ex ante. Specifically, a stay exemption changes firms' investment...
Persistent link: https://www.econbiz.de/10013072713
This article relates corporate credit rating quality to competition in lending between the public bond market and banks. In the model, the monopolistic rating agency's choice of price and quality leads to an endogenous threshold separating low-quality bank-dependent issuers from higher-quality...
Persistent link: https://www.econbiz.de/10013006572
Estimates of investor expectations of government support of large financial firms are often based on large financial firms' lower borrowing costs relative to smaller financial firms. Using pricing data on credit default swaps (CDS) and corporate bonds over the period 2004 to 2013, however, we...
Persistent link: https://www.econbiz.de/10013023801
Dealers in over-the-counter securities form networks to mitigate search frictions. The audit trail for municipal bonds shows the dealer network has a core-periphery structure. Central dealers are more efficient at matching buyers and sellers than peripheral dealers, which shortens intermediation...
Persistent link: https://www.econbiz.de/10013043571
We use a new panel data set on intraday transactions of triparty repos (TPR) to study trading relationships in the over-the-counter market. We test the prediction that search frictions lead to relationship formation. We find that TPR trading parties form relationships with a broad number of...
Persistent link: https://www.econbiz.de/10013210433