Anonymous Lending, Central Clearing, and Rollover Risk

61 Pages Posted: 14 Dec 2017 Last revised: 27 Aug 2019

See all articles by Tobias Dieler

Tobias Dieler

University of Bristol - Department of Finance and Accounting

Loriano Mancini

USI Lugano - Institute of Finance; Swiss Finance Institute

Date Written: Janauary 31, 2019

Abstract

Market design is critical for banks' short term funding. We compare central counterparty (CCP) based markets to over the counter (OTC) markets. While non anonymous OTC markets allocate funds efficiently to borrowers in normal times, anonymity in CCP based markets provides insurance for borrowers, fostering financial stability in a funding crisis. In CCP based markets, borrowers with inefficient technologies can hide among high quality borrowers. In addition to absorbing funding shocks, collateral aligns borrowers' private interests with socially optimally strategies.

Keywords: asymmetric information, resource allocation, financial stability, social welfare

JEL Classification: G01, G14, G21, G28

Suggested Citation

Dieler, Tobias and Mancini, Loriano, Anonymous Lending, Central Clearing, and Rollover Risk (Janauary 31, 2019). Swiss Finance Institute Research Paper No. 18-06. Available at SSRN: https://ssrn.com/abstract=3086097 or http://dx.doi.org/10.2139/ssrn.3086097

Tobias Dieler (Contact Author)

University of Bristol - Department of Finance and Accounting ( email )

Tyndalls Park Road 15-19
Bristol, BS8 1PY
United Kingdom

HOME PAGE: http://https://sites.google.com/site/tobiasdieler/

Loriano Mancini

USI Lugano - Institute of Finance ( email )

Via Giuseppe Buffi 6
6904 Lugano, CH-6904
Switzerland
+41 (0)91 912 46 47 (Fax)

HOME PAGE: http://www.people.usi.ch/mancil/

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

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