Deleveraging after Lehman : evidence from reduced rehypothecation
Singh, Manmohan (Author), Aitken, James (Author)

URLURL - Presentation file, Visit http://www.imf.org/external/pubs/ft/wp/2009/wp0942.pdf New window

Rehypothecation is the practice that allows collateral posted by, say, a hedge fund to their prime broker to be used again as collateral by that prime broker for its own funding. In the United Kingdom, such use of a customerćs assets by a prime broker can be for an unlimited amount of the customerćs assets. And moreover, there are no customer protection rules (such as in the United States under the Securities Act of 1933). The paper shows evidence that, following Lehmanćs bankruptcy, the extent of rehypothecation has declined substantially, in part because investment firms fear losing collateral if their prime broker becomes insolvent. While less rehypothecation reduces counterparty risk in the system, it also reduces market liquidity.

Keywords:ZDA, Velika Britanija, finančne institucije, trg kapitala, vrednostni papirji, hedge skladi, tveganje, stečaj, regulacija, USA, Great Britain, financial institutions, capital market, securities, hedge funds, risk, bankruptcy, regulation
Work type:Not categorized (r6)
Organization:EF - Faculty of Economics
Publisher:International Monetary Fund
Number of pages:11 str.
Place:[Washington (D.C.)]
COBISS.SI-ID:19269350 Link is opened in a new window
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