In March 2020, uncertainty over the COVID-19 pandemic caused severe stress in U.S. financial markets. Specifically, Fleming and Ruela (2020) document a severe impairment of Treasury market functioning, as indicated by a sharp increase in bid/ask spreads, a decline in market depth, and an...

We present an estimate of the total amount of funds primary dealers can access from the intermediation of cash and securities through secured funding transactions (SFTs). We highlight how this activity can introduce an additional source of risk: the abrupt withdrawal of cash borrowers, which we...

We examine the effects of the supplementary leverage ratio (SLR) on large banks’ participation in U.S. Treasury markets. Exploiting exogenous shocks to credit line drawdowns and data on bank’s holdings of Treasury securities, we show that an increase in banks’ balance sheets size reduces...

This paper provides an overview of the literature examining how the introduction of a CBDC would affect the banking sector, financial stability, and the implementation and transmission of monetary policy in a developed economy such as the United States. A CBDC has the potential to improve...

We show that aggregate volatility affects the extent to which agents can share idiosyncratic risks through the valuation of collateral. Both private and public assets are used in insurance markets as collateral, but their exposure to volatility differs. While aggregate volatility decreases the...

In this note, we examine how changes in the yield curve slope affect the provision of credit and intermediation services by non-bank financial institutions (NBFIs), including broker-dealers and hedge funds. Although these NBFIs typically do not lend directly to the non-financial sector, they...

We analyze a market where two firms producing a homogenous good compete by means of two mechanisms: prices and a loyalty bonus. We assume that firms act simultaneously when posting their loyalty bonus and prices. Consumers who purchase from a firmin the first period must return the bonus in case...

What are the consequences of a potential fire sale stemming from the exemption of repurchase agreements (repos) from automatic stay? This paper shows that repo's exemption from stay alters firms' financing and investment decisions ex ante. Specifically, a stay exemption changes firms' investment...