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This paper investigates contagion in financial networks through both debt and collateral markets. Payment from a collateralized debt contract depends not only on the borrower's balance sheet but also on the price of the underlying collateral. I show that the existence of the collateral channel...
Persistent link: https://www.econbiz.de/10015263440
This paper investigates contagion in financial networks through both debt and collateral markets. Payment from a collateralized debt contract depends not only on the borrower's balance sheet but also on the price of the underlying collateral. I show that the existence of the collateral channel...
Persistent link: https://www.econbiz.de/10015269003
This paper investigates contagion in financial networks through both debt and collateral markets. Payment from a collateralized debt contract depends not only on the borrower's balance sheet, but also on the price of the underlying collateral. If the negative liquidity shock is small, then...
Persistent link: https://www.econbiz.de/10015269005
This paper investigates contagion in financial networks through both debt and collateral markets. We find that the role of collateral is mitigating counterparty exposures and reducing contagion but has a phase transition property. Contagion can change dramatically depending on the amount of...
Persistent link: https://www.econbiz.de/10015269241
The Lehman Brothers' bankruptcy triggered the failure of the collateralized debt markets, which was a major contributor of the financial crisis in 2008. Such collateralized debt markets have both collateral price channel and counterparty (borrower and lender) channel of contagion. I propose a...
Persistent link: https://www.econbiz.de/10012847363