The next Brown Bag Seminar is scheduled for Monday, May 29th, 2017, 12.00-13.00 in seminar room D4.0.039. Our speaker will be

Nathan Foley-Fisher

(Board of Governors of the Federal Reserve System).

He will give a talk on "

Over-the-Counter Market Liquidity and Securities Lending

" (joint with Stefan Gissler and Stéphane Verani).

Abstract: This paper studies how over-the-counter (OTC) market liquidity was adversely affected by the collapse of securities lending during the 2007-2008 financial crisis. We combine micro-data on corporate bond OTC market trades with securities lending transactions, in which insurance companies are major counterparties. We exploit cross-sectional differences in the corporate bonds held and lent by insurance companies to estimate the causal effect of securities lending on corporate bond market liquidity. We show that the run on insurers’ securities lending programs in 2008 caused a long-lasting reduction in corporate bond market liquidity, even after controlling for the interaction between funding liquidity and market liquidity.