This paper develops a model of financial institutions that borrow short term and invest in longterm assets that can be traded in frictionless markets. Because these financial intermediaries perform maturity transformation, they are subject to potential runs. We derive distinct liquidity,...

This paper develops a model of financial institutions that borrow short-term and invest in long-term marketable assets. Because these financial intermediaries perform maturity transformation, they are subject to runs. We endogenize the profits of an intermediary and derive distinct liquidity and...

In the literature, bank runs take the form of withdrawals of real demand deposits that deplete a fixed reserve of goods in the banking system. This framework describes the type of bank run that has occurred historically in the United States and more recently in developing countries. However, in...

Vesting of equity payments to an entrepreneur, which is a form of time-contingent compensation, is very common in venture capital contracts. Empirical research suggests that vesting is used to help overcome asymmetric information and agency problems. We show in a theoretical model that vesting...

We build a model of a financial intermediary, in the tradition of Diamond and Dybvig (1983), and show that allowing the intermediary to impose redemption fees or gates in a crisis - a form of suspension of convertibility - can lead to preemptive runs. In our model, a fraction of investors...

This paper describes segregated balance accounts (SBAs), a concept for a new type of account that could provide increased competition for deposits, reduce system-wide balance sheet costs, and improve the transmission of monetary policy by facilitating greater pass-through of interest on excess...

We review recent changes in monetary policy that have led to development and testing of an overnight reverse repurchase agreement (ON RRP) facility, an innovative tool for implementing monetary policy during the normalization process. Making ON RRPs available to a broad set of investors,...

This primer provides a detailed description of the GCF Repo ® Service, a financial service provided by the Fixed Income Clearing Corporation. The primer is composed of an introductory note and two separate papers. The first paper focuses on the clearance and settlement of GCF Repo. These...

This paper studies the risk of fire sales in the tri-party repo market, a large and important market where securities dealers find short-term funding for a substantial portion of their own and their clients' assets. We distinguish between fire sales of assets by a dealer who, facing a run that...

In recent years, U.S. banks have increasingly relied on deposits from financial intermediaries, especially money market funds (MMFs), which collect funds from large institutional investors and lend them to banks. In this paper, we show that intermediation through MMFs allows investors to limit...