This paper presents a model of an over-the-counter bond market in which bond dealers and cash investors arrange repurchase agreements (repos) endogenously. If cash investors buy bonds to store their cash, then they suffer an endogenous bond-liquidation cost because they must sell their bonds...

This paper studies how the allocation of residual losses affects trading and welfare in a central counterparty. I compare loss sharing under two loss-allocation mechanisms - variation margin haircutting and cash calls - and study the privately and socially optimal degree of loss sharing. For...

This paper uncovers trends in payment timing in Canada's Large Value Transfer System (LVTS) from 2003 to 2011. Descriptive analysis shows that LVTS payment activity has not been peaking in the late afternoon since 2008, and the improvement was most significant in 2009. Ordinary least squares...

This paper studies the welfare effects of different credit arrangements and how these effects depend on the trading mechanism and inflation. In a competitive market, a deviation from the Friedman rule is always sub-optimal. Moreover, credit arrangements can be welfare-reducing, because increased...

Using detailed loan transactions-level data we examine the efficiency of an overnight interbank lending market, and the bargaining power of its participants. Our analysis relies on the equilibrium concept of the core, which imposes a set of no-arbitrage conditions on trades in the market. For...

A major policy challenge posed by derivatives clearinghouses is that their collateral requirements can rise sharply in times of stress, reducing market liquidity and further exacerbating downturns. Smoothing sharp changes in collateral requirements - an approach known as through-the-cycle...

Information on the allocation and pricing of over-the-counter (OTC) markets is scarce. Furfine (1999) pioneered an algorithm that provides transaction-level data on the OTC interbank lending market. The veracity of the data identified, however, is not well established. Using permutation methods,...

This paper reviews some recent developments in digital currency, focusing on platform-sponsored currencies such as Facebook Credits. In a model of platform management, we find that it will not likely be profitable for such currencies to expand to become fully convertible competitors to...

Merchants who accept credit cards face payment processing fees. In most countries, the no-surcharge rule prohibits them from using surcharges to pass these fees on to customers. However, merchants are allowed to steer consumers toward less costly payment methods by offering discounts or using...