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Liquidity hoarding and interbank market spreads: the role of counterparty risk

Author

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  • Heider, Florian
  • Hoerova, Marie
  • Holthausen, Cornelia

Abstract

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks JEL Classification: G01, G21, D82

Suggested Citation

  • Heider, Florian & Hoerova, Marie & Holthausen, Cornelia, 2009. "Liquidity hoarding and interbank market spreads: the role of counterparty risk," Working Paper Series 1126, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20091126
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    References listed on IDEAS

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    More about this item

    Keywords

    asymmetric information; counterparty risk; financial crisis; interbank market; liquidity;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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