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Regulating the Repo Market: Implications for Leverage Dynamics and Bubbles

Pascoa, M, Bottazzi, J-M and Luque, J (2017) Regulating the Repo Market: Implications for Leverage Dynamics and Bubbles [Report]

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Abstract

We examine the impact of regulation on repo, leverage, Ponzi schemes and bubbles. Repo Ponzi schemes can be done by creditors who collect haircut and then reuse the collateral that was pledged to them. In bilateral repo, only dealers have such haircut benefit and regulation consists in limiting dealers' positions. In exchanges, the segregation of the haircut avoids Ponzi schemes. However, as we illustrate, both cases allow for bubbles when agents are not uniformly impatient. We also show that all agents may be worse o if repo markets were absent and that bubbles are robust to the endogenous issuance of the securities.

Item Type: Report
Subjects : Economics
Authors :
NameEmailORCID
Pascoa, Mm.pascoa@surrey.ac.ukUNSPECIFIED
Bottazzi, J-MUNSPECIFIEDUNSPECIFIED
Luque, JUNSPECIFIEDUNSPECIFIED
Date : March 2017
Related URLs :
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:38
Last Modified : 18 May 2017 13:14
URI: http://epubs.surrey.ac.uk/id/eprint/821056

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