Search Results
Report
Repo Intermediation and Central Clearing: An Analysis of Sponsored Repo
This paper evaluates the salient forces behind a dealer-intermediary’s decision to move a bilateral repo transaction with a customer into central clearing. We provide evidence that dealers turn to sponsored repo on occasions when balance sheet space is scarce, such as when there is a large issuance of Treasury coupon securities and end-of-month dates. We also find that sponsored repo spreads tend to be affected by a range of factors, with the three largest drivers being money market fund assets, a proxy for hedge fund demand for repo funding, and end-of-month dates.
Discussion Paper
Recent Developments in Hedge Funds’ Treasury Futures and Repo Positions: is the Basis Trade “Back"?
In short, the answer is "probably", at least to some degree. This note summarizes recent developments in hedge funds' Treasury futures and repo positions derived from the Commodities Futures and Trading Commission's (CFTC's) Traders in Financial Futures data and the Office of Financial Research's ("OFR") Cleared Repo Collection.
Report
The term structure of the price of variance risk
We empirically investigate the term structure of variance risk pricing and how it varies over time. We estimate the aversion to variance risk in a stochastic-volatility option pricing model separately for options of different maturities and find that variance risk pricing decreases in absolute value with maturity but remains significantly different from zero up to the nine-month horizon. We find consistent non-parametric results using estimates from Sharpe ratios of delta-neutral straddles. We further show that the term structure is downward sloping both during normal times and in times of ...
Discussion Paper
Money Market Fund Repo and the ON RRP Facility
Between January 2021 and June 2022, money market funds' (MMFs') investments in the Federal Reserve's Overnight Reverse Repurchase (ON RRP) facility rose by $2 trillion, while their private repo lending fell by almost $500 billion. These sizable shifts give us an opportunity to examine how monetary policy implementation and the ON RRP facility interact with the private repo market.