BIP! Finder - Securities market theory: Possession, repo and rehypothecation

2012 • Securities market theory: Possession, repo and rehypothecation

Authors: Bottazzi, J-M; Luque, J; Páscoa, MR

Venue: Journal of Economic Theory

Type: Publication

Abstract: By introducing repo markets we understand how agents need to borrow issued securities before shorting them: (re)-hypothecation is at the heart of shorting. Non-negative amounts of securities in the box of an agent (amounts borrowed or owned but not lent on) can be sold, and recursive use of securities as collateral allows agents to leverage their positions. A binding box constraint induces a liquidity premium: the repo rate becomes special and the security price higher than expected discounted cash-flows. Existence of equilibrium is guaranteed ... (read more)

Impact:

9.99015E-9 5.7349614E-9 39 12

/ Attention: 0 21

Topics: Monetary economics Financial system

DOI: 10.1016/j.jet.2010.11.004

External links: Crossref OpenAIRE

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