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Repo runs: evidence from the tri-party repo market

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  • Adam Copeland
  • Antoine Martin
  • Michael Walker

Abstract

This paper provides a quantitative account of the tri-party repo market during the recent financial crisis. Using data from July 2008 to January 2010, we show that the level of haircuts and the amount of funding were surprisingly stable in this market. The stability of the haircuts contrasts with evidence from the bilateral repo market, where, as shown by Gorton and Metrick (2011), haircuts increased sharply. During the crisis, adjustments in the volume of funding to dealers were not gradual; instead, the amount of funding in the tri-party repo market can decrease precipitously. Our findings suggest that runs in the tri-party repo market resemble traditional bank runs.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 506.

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Date of creation: 2011
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Handle: RePEc:fip:fednsr:506

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Related research

Keywords: Repurchase agreements ; Liquidity (Economics) ; Financial crises;

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References

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  1. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York.
  2. Lasse Heje Pederson & Markus K Brunnermeier, 2007. "Market Liquidity and Funding Liquidity," FMG Discussion Papers dp580, Financial Markets Group.
  3. Michael J. Fleming & Warren B. Hrung & Frank M. Keane, 2010. "Repo Market Effects of the Term Securities Lending Facility," American Economic Review, American Economic Association, vol. 100(2), pages 591-96, May.
  4. Arvind Krishnamurthy & Stefan Nagel & Dmitry Orlov, 2012. "Sizing Up Repo," NBER Working Papers 17768, National Bureau of Economic Research, Inc.
  5. Adam Copeland & Antoine Martin & Michael Walker, 2010. "The tri-party repo market before the 2010 reforms," Staff Reports 477, Federal Reserve Bank of New York.
  6. Kenneth D. Garbade, 2006. "The evolution of repo contracting conventions in the 1980s," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 27-42.
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Citations

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Cited by:
  1. Gary B. Gorton & Andrew Metrick, 2012. "Who Ran on Repo?," NBER Working Papers 18455, National Bureau of Economic Research, Inc.
  2. Guillermo Calvo, 2013. "Puzzling over the Anatomy of Crises: Liquidity and the Veil of Finance," IMES Discussion Paper Series 13-E-09, Institute for Monetary and Economic Studies, Bank of Japan.
  3. Fernando Duarte & Thomas Eisenbach, 2013. "Fire-sale spillovers and systemic risk," Staff Reports 645, Federal Reserve Bank of New York.
  4. Bulow, Jeremy & Klemperer, Paul, 2013. "Market-Based Bank Capital Regulation," Research Papers 2132, Stanford University, Graduate School of Business.
  5. Tobias Adrian & Daniel Covitz & Nellie J. Liang, 2013. "Financial stability monitoring," Staff Reports 601, Federal Reserve Bank of New York.
  6. Jorge Ponce & Marc Rennert, 2012. "Systemic banks and the lender of last resort," Documentos de Trabajo (working papers) 1812, Department of Economics - dECON.
  7. Tobias Adrian & Adam B. Ashcraft & Nicola Cetorelli, 2013. "Shadow bank monitoring," Staff Reports 638, Federal Reserve Bank of New York.
  8. Tobias Adrian Author-Name: Adam B. Ashcraft, 2012. "shadow banking: a review of the literature," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  9. Thomas M. Eisenbach, 2013. "Rollover risk as market discipline: a two-sided inefficiency," Staff Reports 597, Federal Reserve Bank of New York.
  10. Adrian, Tobias, 2014. "Financial stability policies for shadow banking," Staff Reports 664, Federal Reserve Bank of New York.
  11. Sebastian Infante, 2013. "Repo collateral fire sales: the effects of exemption from automatic stay," Finance and Economics Discussion Series 2013-83, Board of Governors of the Federal Reserve System (U.S.).
  12. Linus Wilson & Yan Wu & Stephanie Prejean, 2014. "Are the Bailouts of Wall Street Complements or Substitutes?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 42(1), pages 21-38, March.

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