IDEAS home Printed from https://ideas.repec.org/p/red/sed010/1335.html
   My bibliography  Save this paper

Liquidity Provision, Liquidity Demand and Default Risk in Canada during the Subprime Crisis

Author

Listed:
  • Jakub Kastl

    (Stanford University)

  • Ali Hortacsu

    (University of Chicago)

  • Jason Allen

    (Bank of Canada)

Abstract

We analyze the Canadian banking system and focus on the monetary policy implementation and bank behavior during the subprime market crisis. Using a dataset on bilateral credit lines in the Large Value Transfer System (LVTS) through which transactions between banks are cleared together with data from auctions of liquidity, we analyze and quantify the perceived default risk of individual banks. We compare our results with the time series of the prices of credit default swaps and we argue that the private information about default gets revealed much faster in actions on the interbank market and in the central bank's liquidity auctions than on the CDS market. We further use our model to quantify the benefit to participating banks of being allowed to post the whole non-mortgage portfolio as collateral in the banking system in the post November 2008.

Suggested Citation

  • Jakub Kastl & Ali Hortacsu & Jason Allen, 2010. "Liquidity Provision, Liquidity Demand and Default Risk in Canada during the Subprime Crisis," 2010 Meeting Papers 1335, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:1335
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    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:red:sed010:1335. 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: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.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.