The use of collateral in bilateral repurchase and securities lending agreements

We use unique data from U.S. BHC-affiliated securities dealers to study the use of collateral in bilateral repurchase and securities lending agreements. This is the first paper to provide stylized facts about this market, documenting, among other things, that most trades are backed by U.S. Treasurie...

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Bibliographic Details
Published in:Review of economic dynamics 2019-07, Vol.33, p.228-249
Main Authors: Baklanova, V., Caglio, C., Cipriani, M., Copeland, A.
Format: Article
Language:English
Subjects:
Adverse selection
Haircut
Repo
Securities lending
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Summary:We use unique data from U.S. BHC-affiliated securities dealers to study the use of collateral in bilateral repurchase and securities lending agreements. This is the first paper to provide stylized facts about this market, documenting, among other things, that most trades are backed by U.S. Treasuries and equities, and have either an overnight or open maturity. We also focus on how haircuts are determined in this market, highlighting the differences across asset classes. Finally, we document a negative correlation between haircut and interest rate, a prediction in line with a large set of theories; however this correlation is quite small in magnitude.
ISSN:1094-2025
1096-6099
DOI:10.1016/j.red.2019.05.002