IDEAS home Printed from https://ideas.repec.org/p/fip/fednls/86879.html
   My bibliography  Save this paper

Magnifying the Risk of Fire Sales in the Tri-Party Repo Market

Author

Listed:
  • Leyla Alkan
  • Vic Chakrian
  • Adam Copeland
  • Isaac Davis
  • Antoine Martin

Abstract

The fragility inherent in the tri-party repo market came to light during the 2008-09 financial crisis. One of the main vulnerabilities is the risk of fire sales, which can be enhanced by the response of some investors to stress events. Money market mutual funds (MMFs) and the agents investing cash collateral obtained from securities lending (SLs) are thought to behave, in times of stress, in ways that exacerbate fire-sale risks in the tri-party repo market. Based on detailed investor data, we find that MMFs and SLs constitute almost half of the investor market, making it crucial for tri-party repo participants and regulators to account for MMF and SL investment behavior when considering how to mitigate the risk of fire sales.

Suggested Citation

  • Leyla Alkan & Vic Chakrian & Adam Copeland & Isaac Davis & Antoine Martin, 2013. "Magnifying the Risk of Fire Sales in the Tri-Party Repo Market," Liberty Street Economics 20130717, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:86879
    as

    Download full text from publisher

    File URL: https://libertystreeteconomics.newyorkfed.org/2013/07/magnifying-the-risk-of-fire-sales-in-the-tri-party-repo-market.html
    Download Restriction: no

    More about this item

    Keywords

    systemic risk; tri-party repo; fire sales;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G1 - Financial Economics - - General Financial Markets

    Statistics

    Access and download statistics

    Corrections

    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:fednls:86879. 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: (). General contact details of provider: http://edirc.repec.org/data/frbnyus.html .

    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.

    We have no references for this item. You can help adding them by using 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.