Using a regulatory transaction-level dataset of the UK repo market, we examine the determinants of haircuts. We find that transaction maturity and collateral quality is of a first order importance in determining haircuts. We also find that counterparties matter in determining haircuts. Hedge...

We model banks’ liquidity holding decision as a simultaneous game on an interbank borrowing network. We show that at the Nash equilibrium, the contributions of each bank to the network liquidity level and liquidity risk are distinct functions of its indegree and outdegree Katz-Bonacich...

Using a unique transaction-level data, we document that only 60% of bilateral repos held by UK banks were backed by high-quality collateral. Banks intermediate repo liquidity among different counterparties and use CCPs to reallocate high-quality collaterals among themselves. Furthermore,...

We develop a transparent Bayesian approach to quantify uncertainty about linear stochastic discount factor models. We show that, for a Bayesian decision-maker, the model probability decreases with historical maximum in-sample Sharpe ratios and increases with model dimensions. We apply our...

Probably not. First, allowing the probabilities attached to the states of the economy to differ from their sample frequencies, the Consumption-CAPM is still rejected by the data and requires a very high level of Relative Risk Aversion(RRA) in order to rationalize the stock market risk premium....