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The impact of CCPs' margin policies on repo markets

Author

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  • Arianna Miglietta
  • Cristina Picillo
  • Mario Pietrunti

Abstract

This paper quantifies the impact on the cost of funding in repo markets of the initial margins applied by central clearing counterparties (CCPs). We use contract-level data on the general collateral (GC) segment of Italy's MTS Repo market between January 2011 and April 2014. The analysis shows that the initial margins, paid by all participants, had a positive and significant effect on the cost of funding. Such an impact is consistent across different model specifications and data subsamples.

Suggested Citation

  • Arianna Miglietta & Cristina Picillo & Mario Pietrunti, 2015. "The impact of CCPs' margin policies on repo markets," BIS Working Papers 515, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:515
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    References listed on IDEAS

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    1. Arvind Krishnamurthy & Stefan Nagel & Dmitry Orlov, 2014. "Sizing Up Repo," Journal of Finance, American Finance Association, vol. 69(6), pages 2381-2417, December.
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    9. Jordan, Bradford D & Jordan, Susan D, 1997. " Special Repo Rates: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 52(5), pages 2051-2072, December.
    10. Duffie, Darrell, 1996. " Special Repo Rates," Journal of Finance, American Finance Association, vol. 51(2), pages 493-526, June.
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    13. Valderrama, Laura, 2015. "Macroprudential regulation under repo funding," Journal of Financial Intermediation, Elsevier, vol. 24(2), pages 178-199.
    14. Koeppl, Thorsten & Monnet, Cyril & Temzelides, Ted, 2012. "Optimal clearing arrangements for financial trades," Journal of Financial Economics, Elsevier, vol. 103(1), pages 189-203.
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    16. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
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    18. Bruno Biais & Florian Heider & Marie Hoerova, 2012. "Clearing, Counterparty Risk, and Aggregate Risk," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(2), pages 193-222, July.
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    Citations

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    Cited by:

    1. Moinas, Sophie & Nguyen, Minh & Valente, Giorgio, 2017. "Funding Constraints and Market Illiquidity in the European Treasury Bond Market," TSE Working Papers 17-814, Toulouse School of Economics (TSE).
    2. Corradin, Stefano & Maddaloni, Angela, 2017. "The importance of being special: repo markets during the crisis," Working Paper Series 2065, European Central Bank.
    3. repec:spr:jeicoo:v:13:y:2018:i:1:d:10.1007_s11403-017-0208-1 is not listed on IDEAS
    4. repec:eee:finsta:v:33:y:2017:i:c:p:311-330 is not listed on IDEAS

    More about this item

    Keywords

    repurchase agreements; central clearing counterparties; margin policies;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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