Bank of Canada paper studies central counterparties in repo markets
A recent discussion paper released by the Bank of Canada investigates the impact central counterparties (CCPs) have on repo markets.
Author Hajime Tomura introduces a CCP into a model of a repo market.
"Without the CCP, there exist multiple equilibria in the model," states the paper. "In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market. In another equilibrium, the repo market collapses due to aggregate cash
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