The …xed rate tender is one of the main operational formats usedby central banks in the implementation of their monetary policies. Whileacademic research has largely dismissed the procedure for its tendency to en-courage overbidding, central banks such as the ECB and the Bank of Englandhave...

Interest rate derivatives are among the most actively traded financial instruments in the main currency areas. With values of positions reacting immediately to the underlying index of daily interbank rates, manipulation has become an increasing challenge for the operational implementation of...

I model a financial market that dries out in the wake of premature liquidations.Two main results are obtained. First, liquidity may vanish even if small, riskneutralbuyers could easily compensate the ongoing selling. Thus, more marketsare vulnerable to “runs” than suggested by previous work....

A standard repurchase agreement between two counterpartiesis considered to examine the endogenous choice of collateral, the feasibilityof secured lending, and welfare implications of the central bank’s collateralframework. As an important innovation, we allow for two-sided counterpartyrisk. In...

Among the most puzzling observations for the euro money market are the bid shading in the weekly refinancing operations and the development of interest rate spreads. To explain these observations, we considera standard divisible-good auction à la Klemperer and Meyer (1989) with uniform or...