LTCM Redux? Hedge fund Treasury trading, funding fragility, and risk constraints

• 成果类型: Article
• 署名作者: Kruttli, Mathias S.; Monin, Phillip J.; Petrasek, Lubomir; Watugala, Sumudu W.
• 署名单位: Indiana University System; Indiana University Bloomington; IU Kelley School of Business; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2025.104017
• 发表日期: 2025
• 关键词: HEDGE FUNDS; Treasury markets; arbitrage; Value-at-risk; Risk constraints; liquidity; Creditor constraints; Relative value

摘要

We exploit the 2020 Treasury market shock to analyze how external and internal constraints impact arbitrageurs. Using regulatory filings, we find that hedge funds reduced arbitrage activities and increased cash holdings, despite stable credit and low contemporaneous redemptions. Creditors' regulatory and liquidity constraints were not propagated to hedge funds through repo-Treasury arbitrageurs' predominant financing source. Fund-creditor borrowing data reveal more regulated dealers provided, and more important clients received, disproportionately higher funding. Value-at-risk reported by funds suggests internal risk constraints were binding. Our results support theoretical predictions that arbitrageur risk constraints and precautionary liquidity management can amplify market instability even when contemporaneous financing remains resilient.