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Re‐Use of Collateral in the Repo Market
Author(s) -
FUHRER LUCAS MARC,
GUGGENHEIM BASIL,
SCHUMACHER SILVIO
Publication year - 2016
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12330
Subject(s) - collateral , business , collateral damage , scarcity , database transaction , economics , finance , computer science , microeconomics , database , criminology , sociology
This paper introduces a methodology to estimate the re‐use of collateral based on actual transaction data. With a comprehensive data set from the Swiss franc repo market we are able to provide the first systematic study on the re‐use of collateral. We find that re‐using collateral was most popular prior to the financial crisis when roughly 10% of the outstanding interbank volume was secured with re‐used collateral. Furthermore, we show that the re‐use of collateral increases with the scarcity of collateral. By giving an estimate of the collateral re‐use and explaining its drivers, the paper contributes to the on‐going debate on collateral availability.