Interbank Lending, Credit-Risk Premia, and Collateral - Paperback - 9781249505310

We study the functioning of secured and unsecured interbank markets in the presence of credit risk. The model generates empirical predictions that are in line with developments during the 2007-09 financial crisis. Interest rates decouple across secured and unsecured markets following an adverse shock to credit risk. The scarcity of underlying collateral may amplify the volatility of interest rates in secured markets. We use the model to discuss various policy responses to the crisis.

• | Author: Florian Heider
• | Publisher: Bibliogov
• | Publication Date: Sep 24, 2012
• | Number of Pages: 42 pages
• | Binding: Paperback or Softback
• | ISBN-10: 1249505313
• | ISBN-13: 9781249505310