Pré-Publication, Document De Travail (Working Paper) Année : 2025

Liquidity, Collateral Quality and Interest Rate

Résumé

This paper analyzes how collateral quality shocks affect banks' liquidity management and the risk-free rate. We develop a model where banks manage liquidity through near-cash assets and marketable securities subject to idiosyncratic and/or aggregate shocks. Collateral quality deterioration leads to non-monotonic changes in liquidity holdings: moderate declines reduce cash holdings via lower market returns, while severe declines cause precautionary hoarding and market freezes. Reduced collateral quality depresses the risk-free rate. Policy interventions, including liquidity regulation and negative interest rate policies can mitigate these effects. Our findings highlight the risks of collateral quality shocks and the importance of policy complementarities in addressing liquidity issues.
Fichier principal
Vignette du fichier
wp_2025_-_nr_02.pdf (775.99 Ko) Télécharger le fichier
Origine Fichiers produits par l'(les) auteur(s)

Dates et versions

hal-04901384 , version 1 (20-01-2025)

Identifiants

  • HAL Id : hal-04901384 , version 1

Citer

Jung-Hyun Ahn, Vincent Bignon, Régis Breton, Antoine Martin. Liquidity, Collateral Quality and Interest Rate. 2025. ⟨hal-04901384⟩
0 Consultations
0 Téléchargements

Partager

More