The Full Story of Runs

52 Pages Posted: 25 May 2017 Last revised: 25 Mar 2024

See all articles by Jun Kyung Auh

Jun Kyung Auh

Georgetown University - Department of Finance; Yonsei University - School of Business

Mattia Landoni

Federal Reserve Banks - Federal Reserve Bank of Boston

Hayong Yun

Michigan State University - Department of Finance

Date Written: November 15, 2023

Abstract

We examine credit supply during a repo run. Lenders initially relax lending terms upon an initial bad signal about the borrower’s creditworthiness. Lenders with a greater exposure to the borrower and a closer lending relationship intervene faster and show a longer period of patience, and so do lenders whose loans are backed by more illiquid assets. The initial credit relaxation is consistent with lenders having an incentive to prolong the borrower’s life. Other loan terms (price and maturity) remain stable, pointing to the central role of collateral in dynamically managing risk exposure.

Keywords: Bank Run, Collateral Requirement, Lending Relationship

JEL Classification: D86, G33, G34, K22

Suggested Citation

Auh, Jun Kyung and Auh, Jun Kyung and Landoni, Mattia and Yun, Hayong, The Full Story of Runs (November 15, 2023). Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2023, Available at SSRN: https://ssrn.com/abstract=2972738 or http://dx.doi.org/10.2139/ssrn.2972738

Jun Kyung Auh (Contact Author)

Yonsei University - School of Business ( email )

50 Yonsei-ro, Seodaemun-gu
Seoul, 120-749
Korea, Republic of (South Korea)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States

Mattia Landoni

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Hayong Yun

Michigan State University - Department of Finance ( email )

667 N Shaw Lane, Room 339
East Lansing, MI 48824-1122
United States
517-884-0549 (Phone)

HOME PAGE: http://https://sites.google.com/view/hayongyun/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
142
Abstract Views
1,674
Rank
368,681
PlumX Metrics