Liquidating illiquid collateral

• 成果类型: Article
• 署名作者: Oehmke, Martin
• 署名单位: Columbia University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2013.02.001
• 发表日期: 2014
• 页码: 183-210
• 关键词: Collateral; liquidation; Repo market; illiquidity; fire sales; Creditor structure; Counterparty risk management

摘要

Defaults of financial institutions can cause large, disorderly liquidations of repo collateral. This paper analyzes the dynamics of such liquidations. The model shows that (i) the equilibrium price of the collateral asset can overshoot; (ii) the creditor structure in repo lending involves a fundamental trade-off between risk sharing and inefficient rushing for the exits by competing sellers of collateral; (iii) repo lenders should take into account creditor structure, strategic interaction, and their own balance sheet constraints when setting margins; and (iv) the model provides a framework to analyze transfers of repo collateral to deep-pocket buyers or a repo resolution authority. (C) 2013 Elsevier Inc. All rights reserved.