The pricing implications of the oligopolistic securities lending market : a beneficial owner perspective

In the last decade, central bank interventions, flights to safety, and the shift in derivatives clearing resulted in exceptionally high demand for high quality liquid assets, such as German treasuries, in the securities 
In the last decade, central bank interventions, flights to safety, and the shift in derivatives clearing resulted in exceptionally high demand for high quality liquid assets, such as German treasuries, in the securities lending market besides the traditional repo market activities. Despite the high demand, the realizable securities lending income has remained economically negligible for most beneficial owners. We provide empirical evidence of pricing inefficiencies in the non-transparent, oligopolistic securities lending market for German treasuries from 2006 to 2015. Consistent with Duffie, Gârleanu and Pedersen (2005)’s theory, we find that the less connected market participants’ interests are underrepresented, evident in the longer maturity segment, where lenders are more likely to be conservative passive investors, such as pension funds and insurance firms. The low price elasticity in this segment hinders these beneficial owners to fully capitalize on the additional income from securities lending, giving rise to important negative welfare implications.
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Metadaten
Author:Zsuzsa R. Huszár, Zorka Simon
URN:urn:nbn:de:hebis:30:3-466823
URL:https://ssrn.com/abstract=3203304
Parent Title (English):SAFE working paper series ; No. 215
Series (Serial Number):SAFE working paper series (215)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2018/07/05
Issue:June 15, 2018
Pagenumber:56
HeBIS PPN:434661880
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G12 Asset Pricing; Trading volume; Bond Interest Rates
G18 Government Policy and Regulation
G21 Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
G23 Pension Funds; Other Private Financial Institutions
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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