Study examines pricing differences in securities lending markets
A securities-lending study uses transaction-level data to examine returns from lending the same security against cash or securities collateral. The authors develop a model in which returns compensate for security risk, illiquidity and scarce dealer balance-sheet capacity. They find that the return gap between the two segments widens with risk, illiquidity, dealer constraints and collateral reusability, but narrows as participation across both segments increases.
People involved
Gerardo FerraraEvangelos BenosAngelo RanaldoVittorio Vergano