Topic: Tri-Party Repo Pricing
Speaker: Grace Xing Hu, Assistant Professor, School of Economics and Finance, University of Hong Kong
Date: December 10th, 2014 (Wed.)
Time: 12:30-1:30pm
Location: Building 1, Room 501, Faculty Lounge
Language: English
Abstract:
Taking advantage of the recently available N-MFP rep orts filed by U.S. money market funds to the SEC, we construct a complete sample of tri-party repo transactions between MMFs and dealer banks from November 2010 to August 2013. The data is unique in that it contains security-level collateral information, which enables us to investigate the key determinants of tri-party repo haircuts and spreads, focusing in particular on their sensitivity to collateral quality. We find a large heterogeneity in haircuts among repos collateralized with equities and corporate bonds. Surprisingly, this large heterogeneity is mainly driven by differences across various money market fund families. Controlling for the fund family, most fund families assign uniform haircuts to all of their repos, with the exception of a few fund families that calibrate haircuts to the quality of the collateral and the identities of the dealers. Repo spreads are mainly determined by the maturity, and are in general insensitive to the collateral and counter-party risks. By contrast, repos backed by treasuries are priced homogeneously, with little variations in both haircuts and spreads, regardless of the fund family.
About the speaker:
Dr. Grace Xing Hu received her PhD in Economics from Princeton University, and joined the University of Hong Kong in 2011. She also holds a BS in Computer Science from University of Science and Technology of China and a MS from Northwestern University. She has a joint appointment as Assistant Professor of Finance in the School of Economics and Finance and the School of Business. Dr. Hu's research focuses on empirical asset pricing, in particular, liquidity, credit risk and financial crises.
