Collateral Choice
Series
School of Finance Working Paper
Type
working paper
Date Issued
2022-06-09
Author(s)
Abstract (De)
This is the first paper studying collateral choices in one of the main short-term funding markets, the repurchase agreement (repo) market. In general collateral repos, the borrower can choose which bond he delivers as collateral out of a predefined list. Collateral availability and opportunity cost are the two main drivers of this collateral choice. In aggregate, on-the-run bonds are more likely to be delivered than cheapest-to-post securities which is surprising given that the former is more expensive. I rationalize those findings in a theoretical framework and show that bonds with higher repo delivery volumes have lower bond market liquidity.
Language
English
Keywords
Collateral
Repo
Bond Market
On-the-run
Liquidity
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Publisher
SoF-HSG
Volume
2022
Number
03
Pages
48
Subject(s)
Division(s)
Eprints ID
266514
File(s)![Thumbnail Image]()
Name
2022_03_Ballensiefen.pdf
Size
1.4 MB
Format
Adobe PDF
Checksum (MD5)
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