IDEAS home Printed from
   My bibliography  Save this article



  • Cyril Monnet


How would you feel if even though you were making regular monthly payments, your mortgage bank sold your house? This may seem like an odd question, but this type of situation happens every day in financial markets in a practice known as rehypothecation. Although such practices may be hard for nontraders to understand, rehypothecation is widespread in financial markets. Following the crisis of 2007-2009, the Dodd-Frank Act put restrictions on rehypothecation for derivatives. To understand the scope of these restrictions, we need to understand the role of rehypothecation in financial trades. In this article, Cyril Monnet discusses questions such as: Which party to a financial trade does rehypothecation benefit? Are there limits to its advantages? And how should it be regulated? There are no hard and fast answers to the last question, but the author notes that we can make a more informed decision about the pros and cons of various forms of regulation if we understand the underlying economics.

Suggested Citation

  • Cyril Monnet, 2011. "Rehypothecation," Business Review, Federal Reserve Bank of Philadelphia, issue Q4, pages 18-25.
  • Handle: RePEc:fip:fedpbr:y:2011:i:q4:p:18-25:n:11-12

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Tobias Adrian & Christopher R. Burke & James J. McAndrews, 2009. "The Federal Reserve's Primary Dealer Credit Facility," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Aug).
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpbr:y:2011:i:q4:p:18-25:n:11-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Beth Paul). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.