generations, even if the underlying productivity risk is small or zero. We conclude that a joint policy package of orderly default …

between short-term repo and long-term investments that banks need to finance. The resulting rollover risk in repo financing … through default. Moreover, the contagious illiquidity interacts with banks' valuation over the repo contract, forming a … failing mechanism. I show that, as in the crisis, when collateral risk increases unexpectedly, the haircut and interest rate …