Repurchase Options in the Market for Lemons

• 成果类型: Article; Early Access
• 署名作者: Bigio, Saki; Shi, Liyan
• 署名单位: University of California System; University of California Los Angeles; National Bureau of Economic Research; Carnegie Mellon University; Center for Economic & Policy Research (CEPR)
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdaf082
• 发表日期: 2025
• 关键词: Adverse selection; endogenous liquidity; insurance markets; Repo; equilibrium; INFORMATION; efficient; MODEL

摘要

We study repurchase options (repo contracts) in a competitive asset market with adverse selection. Gains from trade emerge from a liquidity need, but private information about asset quality prevents the full realization of trades. In equilibrium, a single repo contract pools all assets. The embedded repurchase option mitigates adverse selection by improving the volume of trades relative to outright sales. However, liquidity provision can be inefficiently low as lenders compete to attract high-quality assets via high haircuts and low rates. The equilibrium has a closed form and aligns well with empirical patterns across Mortgage-Backed Securities repos.