Magyar nyelven nem elérhető
Tobias Dieler
- 2 April 2026
- WORKING PAPER SERIES - No. 3214Details
- Abstract
- Repo markets clear either bilaterally over the counter (OTC) or through central counterparties (CCPs), which differ in how counterparty risk is priced. In bilateral markets, repo rates reflect borrower-specific risk, while CCP clearing pools counterparties and applies a common pricing rule. We develop a model of security-driven repo in which repo rates are non-linear in borrower risk. As a result, averaging borrower-specific OTC prices yields more negative rates than pricing the pooled borrower in CCP markets. The model predicts that the CCP–OTC specialness gap compresses during periods of counterparty uncertainty and varies with borrower and collateral characteristics. Using transaction-level data from the euro-area interbank repo market around the March 2020 COVID-19 shock, we find evidence consistent with these predictions. Our results show that central clearing dampens specialness in normal times but stabilizes repo pricing during stress.
- JEL Code
- D47 : Microeconomics→Market Structure and Pricing→Market Design
D82 : Microeconomics→Information, Knowledge, and Uncertainty→Asymmetric and Private Information, Mechanism Design
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages