Abstract

http://ssrn.com/abstract=1740663
 
 

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Reforming Money Market Funds


Martin N. Baily


Brookings Institution

John Y. Campbell


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

John H. Cochrane


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Douglas W. Diamond


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Darrell Duffie


Stanford University - Graduate School of Business

Kenneth R. French


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Anil K. Kashyap


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Frederic S. Mishkin


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

David S. Scharfstein


Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Robert J. Shiller


Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

Matthew J. Slaughter


Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Hyun Song Shin


Princeton University - Department of Economics

Jeremy C. Stein


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Rene M. Stulz


Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

January 14, 2011

Tuck School of Business Working Paper No. 2011-86
Rock Center for Corporate Governance at Stanford University Working Paper No. 109
Columbia Business School Research Paper No. 12-13

Abstract:     
The current stable-NAV model for prime money market funds exposes fund investors and systemically important borrowers to runs like those that occurred after the failure of Lehman in September 2008. This working paper, by the Squam Lake Group, argues that, to reduce this risk, funds should have either floating NAVs or buffers provided by their sponsors that can absorb losses up to a level to be set by regulators. We suggest alternative designs for such a buffer, as well as considerations that should be taken into account when determining its required size.

Number of Pages in PDF File: 10

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Date posted: January 19, 2011 ; Last revised: February 20, 2012

Suggested Citation

Baily, Martin N. and Campbell, John Y. and Cochrane, John H. and Diamond, Douglas W. and Duffie, Darrell and French, Kenneth R. and Kashyap, Anil K. and Mishkin, Frederic S. and Scharfstein, David S. and Shiller, Robert J. and Slaughter, Matthew J. and Shin, Hyun Song and Stein, Jeremy C. and Stulz, Rene M., Reforming Money Market Funds (January 14, 2011). Tuck School of Business Working Paper No. 2011-86; Rock Center for Corporate Governance at Stanford University Working Paper No. 109; Columbia Business School Research Paper No. 12-13. Available at SSRN: http://ssrn.com/abstract=1740663 or http://dx.doi.org/10.2139/ssrn.1740663

Contact Information

Martin N. Baily
Brookings Institution ( email )
1775 Massachusetts Ave, NW
Washington, DC 20036
United States
John Y. Campbell
Harvard University - Department of Economics ( email )
Littauer Center
Room 213
Cambridge, MA 02138
United States
617-496-6448 (Phone)
617-495-7730 (Fax)
HOME PAGE: http://scholar.harvard.edu/campbell
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
John H. Cochrane
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-3059 (Phone)
773-702-0458 (Fax)
HOME PAGE: http://faculty.chicagobooth.edu/john.cochrane/research/Papers/

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Douglas W. Diamond
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7283 (Phone)
HOME PAGE: http://faculty.chicagobooth.edu/douglas.diamond/

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
James Darrell Duffie
Stanford University - Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States
650-723-1976 (Phone)
650-725-7979 (Fax)

Kenneth R. French
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Anil K. Kashyap
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7260 (Phone)
773 702-0458 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-7260 (Phone)
773-702-0458 (Fax)
Frederic S. Mishkin
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
David S. Scharfstein
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-496-5067 (Phone)
617-496-8443 (Fax)
HOME PAGE: http://www.people.hbs.edu/dscharfstein/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert J. Shiller
Yale University - Cowles Foundation ( email )
Box 208281
New Haven, CT 06520-8281
United States
203-432-3708 (Phone)
203-432-6167 (Fax)
HOME PAGE: http://www.econ.yale.edu/~shiller/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
203-432-3708 (Phone)
Yale University - International Center for Finance ( email )
Box 208200
New Haven, CT 06520
United States
203-432-3708 (Phone)
203-432-6167 (Fax)
Matthew J. Slaughter
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Hyun Song Shin
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States

Jeremy C. Stein
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-6455 (Phone)
617-496-7352 (Fax)
HOME PAGE: http://post.economics.harvard.edu/faculty/stein/stein.html
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Rene M. Stulz (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
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