money2-lectures-Lec 21--Shadow Banking, Central Banking

System interlinkages and system behavior normal

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Unformatted text preview: h) Capital reserves (Haircuts) Proprietary dealing (price risk, “leverage”) • In order to focus on…. – System interlinkages and system behavior – Normal liquidity risk, not tail solvency risk – Tail liquidity backstops, both funding liquidity (money) and market liquidity (capital) Financial Stability Board (WS5) • “Securities lending and repo markets play crucial roles in supporting price discovery and secondary market liquidity for a variety of securities issued by both public and private agents.” A Bagehot Moment Regulation I: Systemic Risk “Inherent Instability of Credit” • Hawtrey (1919) Currency and Credit • Minsky (1986) Stabilizing an Unstable Economy • Adrian and Shin (2010) “Liquidity and Leverage” Centrality of the Dealer Function • Treynor, 1987 Funding Liquidity and Market Liquidity Boom Order Flow: Asset Manager > Capital Funding Bank Bust Order Flow: Asset Manager < Capital Funding Bank Bust Order Flow: Dealer Funding Stress...
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This document was uploaded on 02/16/2014.

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