Were Banks Exposed to Sell-offs by Open-End Funds during the Covid Crisis?
Abstract: Should open-end mutual funds experience redemption pressures, they may be forced to sell assets, thus contributing to asset price dislocations that in turn could be felt by other entities holding similar assets. This fire-sale externality is a key rationale behind proposed and implemented regulatory actions. In this post, I quantify the spillover risks from fire sales, and present some preliminary results on the potential exposure of U.S. banking institutions to asset fire sales from open-end funds.
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Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2021-10-18