differs from repos in two important ways: the returned collateral can differ from those received, and the MBS ownership …) decreases in prepayment risk exposure during the financing period, and (iv) decreases in expected MBS returns. During its QE …

I develop a dynamic model of collateral circulation in a repo market, where financial institutions borrow from and lend … to one another against illiquid collateral. The model emphasizes an important tradeoff between economic efficiency and … financial stability. On one hand, easier collateral circulation makes repos liquid and increases steady state investment through …

fire sale prices. Fire sales arise endogenously because of limited capital available to purchase collateral posted by … concentrates asset ownership with firms that have preferences to hold highly leveraged positions and risk default. The premium … collateral immediately, reducing the severity of a fire sale and ex ante price distortions …

sense that repo lending increases with risk, while spreads, maturities, and haircuts remain stable. Our comparison across … different repo markets shows that anonymous CCP-based trading, safe collateral, and the absence of an unwind mechanism are the …

This paper models an unexplored source of liquidity risk faced by large broker-dealers: collateral runs. By setting … activities. Cash borrowers internalize the risk of losing their collateral in case their dealer defaults, prompting them to … withdraw it. This incentive creates strategic complementarities for counterparties to withdraw their collateral, reducing a …

The spread between unsecured and repo rates (collateral spread) fluctuates substantially and is negative on a … significant portion of days. Recent theoretical work argues that collateral spreads are determined by a constrained … collateral spreads arise in equilibrium if unsecured markets are sufficiently tight, unsecured rates spike down, or security …

collateral. The theory is based on unsecured borrowing constraints in the market for liquidity. Repos and security cash …-market trades are alternative means to get liquidity. Collateral spreads (unsecured less repo rate) can turn negative if borrowing …-arbitrage theory sheds light on the evolution of collateral spreads over time …

Value-at-Risk (VaR) criterion, and we then study the emergence of collateral hoarding cascades in different networks. Our …We study how network structure affects the dynamics of collateral in presence of rehypothecation. We build a simple … model wherein banks interact via chains of repo contracts and use their proprietary collateral or re-use the collateral …

This paper models an unexplored source of liquidity risk faced by large broker-dealers: collateral runs. By setting … activities. Cash borrowers internalize the risk of losing their collateral in case their dealer defaults, prompting them to … withdraw it. This incentive creates strategic complementarities for counterparties to withdraw their collateral, reducing a …