(with Zack Saravay) Review of Financial Studies, in press
(with Guillermo Ordoñez) Journal of Monetary Economics, January 2025, Volume 149, 103693
(with Kyungmin Kim, Anna Orlik, Andre F. Silva, and Robert Tetlow) Annual Review of Financial Economics, 2024, Volume 16, 2024
(with Kyungmin Kim, Anna Orlik, Andre F. Silva, and Robert Tetlow) European Economy, 2023, 53-64
(with Alexandros Vardoulakis) Review of Financial Studies, June 2021, Vol. 34, Issue 6, 2949–2992
(with Yesol Huh) Journal of Banking and Finance, January 2021, Vol. 122, 105999
Journal of Financial Economics, June 2020, 136(3), 828-856
(with Charles Press and Zack Saravay) AEA Papers and Proceedings, May 2020, Vol 101, 482-86
Journal of Financial Economics, July 2019, 133(1), 42-63
(with Jennie Bai, Erik Bostrom, and Victoria Ivashina)
Using confidential transaction-level data on overnight tri-party Treasury repo from 2018–2025, we study liquidity flows within bank holding companies (BHCs) between primary dealers and affiliated entities. Affiliates, especially depository institutions with abundant reserves, provide a large share of dealers’ repo funding, yet affiliated repo borrowing is systematically more expensive: dealers pay an affiliation premium of about 4–5 bps relative to otherwise comparable unaffiliated trades, even after controlling for trade characteristics and market conditions. We interpret this premium as an internal transfer price.Because consolidated leverage regulation nets intra-BHC positions and lowers the marginal balance sheet cost of funding moved within the group, affiliated trades generate a regulatory ``rent'' that is shared between the dealer and the affiliate. Consistent with this mechanism, the premium widens when dealer balance sheet constraints are tighter, compresses sharply during a temporary leverage regulation exemption for reserves and Treasuries, and reappears after reinstatement. Finally, we estimate the pass-through of this internal liquidity channel to the broader financial system.
(with Sriya Anbil and Zeynep Senyuz)
We introduce a microstructure-based framework to analyze demand and supply dynamics in the federal funds market. Using high-frequency bank-level data, we show that only a fraction of banks meaningfully adjust their reserve holdings following deposit shocks, challenging the representative-bank assumption in aggregate reserve demand models. We further find that non-bank lenders such as Federal Home Loan Banks, supply funds elastically, whereas bank lenders—particularly bankers’ banks that extend wholesale credit to smaller banks—are price-inelastic and increasingly so as reserves decline. Importantly, the rates charged by bank lenders are negatively correlated with their reserve positions, and offer an indicator of scarcity as reserves come down.
(with David Bowman and Yesol Huh)
In this paper, we provide a comprehensive investigation of the potential for expanded central clearing to reduce the costs of the supplementary leverage ratio (SLR) on Treasury market intermediation in both cash and repo markets. Combining a detailed analysis of the rules involved in calculating the SLR with a unique set of regulatory data, we conclude that expanding central clearing would have relatively limited effects on the level of SLRs. We do find intermediaries’ increase their balance sheet netting when their regulatory balance sheet costs are higher. Our data permits us to establish a number of empirical facts related to the noncentrally cleared bilateral (NCCB) repo segment, and to repo activity overall, at the bank holding company level. We find that sizeable amounts of bilaterally-cleared activity would not be nettable even if centrally cleared. We also find that a significant portion of activity is already nettable outside of central clearing because dealers are structuring their NCCB trades to net. While expanded central clearing could have other benefits, such as imposing a more uniform margin regime on Treasury market intermediation, the scope of its effects on reducing balance sheet costs associated with the leverage ratio is limited.
(with Giovanni Favara and Marcelo Rezende)
We examine the effects of the supplementary leverage ratio (SLR) on banks’ participation in U.S. Treasury markets. Exploiting confidential supervisory data on banks' Treasury exposures, we show that an exogenous increase in banks’ balance sheet size reduces their participation in Treasury markets. This effect is relatively larger for banks with lower SLR buffers and changed when direct Treasury holdings were temporarily excluded from the computation of the SLR. These results are not driven by liquidity or risk-based capital requirements, and suggest that the SLR curtails banks’ ability to participate in markets for safe assets.
What are the consequences of a potential fire sale stemming from the exemption of repurchase agreements (repos) from automatic stay? Repos' exemption from automatic stay alters firms' financing and investment decisions ex ante, enabling them to purchase assets at fire sale prices. Future fire sales create a premium for holding on to cash, concentrating asset ownership with firms that risk default. This reduces the initial asset price, inducing more firms to take on leverage, increasing the amount of default. When repo is subject to stay lenders wait to receive their collateral, eliminating the fire sale but imposing an additional lock-up cost. This paper finds that repos using illiquid collateral with small lock-up costs should not be exempt from normal bankruptcy.
(with Lucy Cordes) FEDS Notes, February 2025
(with Lia Chabot, Paul Cochran, and Benjamin Iori) FEDS Notes, September 2024
(with Paul Cochran, Lubomir Petrasek, Zack Saravay, and Mary Tian) FEDS Notes, August 2023
(with Kyungmin Kim, Anna Orlik, Andre F. Silva, and Robert Tetlow) Finance and Economics Discussion Series (FEDS), November 2022
(with Phillip Monin, Lubomir Petrasek, and Mary Tian) FEDS Notes, October 2022
(with Lubomir Petrasek, Zack Saravay, and Mary Tian) FEDS Notes, August 2022
(with Zack Saravay) FEDS Notes, December 2020
(with Charles Press and Jacob Strauss) FEDS Notes, July 2020
(with Charles Press and Jacob Strauss) FEDS Notes, December 2018
(with Thomas Eisenbach) Federal Reserve Bank of New York Liberty Street Economics, November 2017
Loyalty Inducing Programs and Competition with Homogeneous Goods
(with Nicolas Figueroa and Ronald Fischer) Documentos de Trabajo 249. Centro de Economia Aplicada, Universidad de Chile