Department of Economics
Princeton, NJ 08544-1021
Tel: (609) 258-4012
NBER Program Affiliations:
NBER Affiliation: Research Associate
Institutional Affiliation: Princeton University
Information about this author at RePEc
NBER Working Papers and Publications
|November 2017||Bid Shading and Bidder Surplus in the U.S. Treasury Auction System|
with Ali Hortaçsu, Allen Zhang: w24024
We analyze bidding data from uniform price auctions of U.S. Treasury bills and notes between July 2009-October 2013. Primary dealers consistently bid higher yields compared to direct and indirect bidders. We estimate a structural model of bidding that takes into account informational asymmetries introduced by the bidding system employed by the U.S. Treasury. While primary dealers’ estimated willingness-to-pay is higher than direct and indirect bidders’, their ability to bid-shade is even higher, leading to higher yield/lower price bids. Total bidder surplus averaged to about 3 basis points across the sample period along with efficiency losses around 2 basis points.
|August 2015||An Empirical Analysis of Funding Costs Spillovers in the EURO-zone with Application to Systemic Risk|
with Pietro Bonaldi, Ali Hortaçsu: w21462
We propose a framework for estimation of spillovers between funding costs of individual banks. The estimation proceeds in three steps: First, using data from liquidity auctions of the European Central Bank, we estimate the funding costs in a given week for each individual bank. In the second step, we apply the adaptive elastic net (a LASSO type estimator) to this panel to estimate the financial network. Finally, using the estimated network we propose new measures of the systemicness and vulnerability of each bank. Our measure of systemicness has quite a natural interpretation, since it can roughly be viewed as the total externality a bank would impose on the funding costs of all other banks in the system. We estimate that most of the banks have fairly weak links and, therefore, if one were...
|July 2009||The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for Short-Term Funds|
with Nuno Cassola, Ali Hortacsu: w15158
In this paper we study European banks' demand for short-term funds (liquidity) during the summer 2007 subprime market crisis. We use bidding data from the European Central Bank's auctions for one-week loans, their main channel of monetary policy implementation. Through a model of bidding, we show that banks' behavior reflects their cost of obtaining short-term funds elsewhere (i.e., in the interbank market) as well as a strategic response to other bidders. We find considerable heterogeneity across banks in their willingness to pay for short-term funds supplied in these auctions. Accounting for the strategic component is important: while a naive interpretation of the raw bidding data may suggest that virtually all banks suffered a dramatic increase in the cost of obtaining funds in the inte...
Published: Nuno Cassola & Ali HortaÃ§su & Jakub Kastl, 2013. "The 2007 Subprime Market Crisis Through the Lens of European Central Bank Auctions for ShortâTerm Funds," Econometrica, Econometric Society, vol. 81(4), pages 1309-1345, 07. citation courtesy of