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Working Paper

Bargaining Power in the Repo Market

December 31, 2011
Issue 2011-14

Summary

In this paper, we analyze the price setting behavior of banks in the Swiss franc repo market by means of network topology concepts and measures. The sample ranges from October 1999 to December 2009. Hence, it covers a large part of the money market turmoil that started in August 2007. Among others, we find evidence that market participants use their bargaining power as well as private information between two trading partners for price differentiation. The effect of the bargaining power was even more pronounced during the financial turmoil.

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Issue:
14
Pages:
30
JEL classification:
D85, E43, E58, G14, G21, G28
Keywords:
Interbank market, repo, network, money market turmoil, financial stability, pricing, bargaining power, Switzerland
Year:
2011

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Author(s)

  • Prof. Dr. Sébastien P. Kraenzlin

  • Benedikt von Scarpatetti

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