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A Map of Collateral Uses and Flows

Author

Listed:
  • Andrea Aguiar

    (Morgan Stanley)

  • Dror Y. Kenett

    (Office of Financial Research)

  • Richard Bookstaber

    (Regents of the University of California)

  • Thomas Wipf

    (Morgan Stanley)

Abstract

All flows of secured funding in the financial system are met by flows of collateral in the opposite direction. A network depicting secured funding flows thus implicitly reveals a network of collateral flows. Collateral can also be presented as its own network to show collateral arrangements with bilateral counterparties, triparty banks, and central counterparties; the purpose and incentives of collateral exchanges; and participants involved. We create a collateral map to show how this function of the financial system works, especially with secured funding and derivatives activity. This paper provides insights into the increased demand for collateral, the reduced capacity for banks to act as collateral intermediaries, and examples of risks and vulnerabilities in collateral flows.

Suggested Citation

  • Andrea Aguiar & Dror Y. Kenett & Richard Bookstaber & Thomas Wipf, 2016. "A Map of Collateral Uses and Flows," Working Papers 16-06, Office of Financial Research, US Department of the Treasury.
    • Handle: RePEc:ofr:wpaper:16-06
    as

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    File URL: https://www.financialresearch.gov/working-papers/files/OFRwp-2016-06_Map-of-Collateral-Uses.pdf
    File Function: First version, 2016
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    References listed on IDEAS

    as
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    Cited by:

    1. Luu, Duc Thi & Napoletano, Mauro & Barucca, Paolo & Battiston, Stefano, 2021. "Collateral Unchained: Rehypothecation networks, concentration and systemic effects," Journal of Financial Stability, Elsevier, vol. 52(C).
    2. Berndsen, Ron, 2020. "Five Fundamental Questions on Central Counterparties," Other publications TiSEM 1f3bd844-92ab-4104-8f57-9, Tilburg University, School of Economics and Management.
    3. Ron Berndsen, 2021. "Fundamental questions on central counterparties: A review of the literature," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(12), pages 2009-2022, December.
    4. Marco Bardoscia & Ginestra Bianconi & Gerardo Ferrara, 2019. "Multiplex network analysis of the UK over‐the‐counter derivatives market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(4), pages 1520-1544, October.
    5. repec:hal:spmain:info:hdl:2441/2b7q60gmqo82aqr0p34bieidke is not listed on IDEAS

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    Keywords

    central counterparties (ccp); maps; collateral; margin lending; securities lending;
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