Endnotes

¹For a good narrative of these events, see Chapter VI of BIS (2008).

²See Shellock (2008) and Rappaport, Mollenkamp, and Richardson (2008).

³As explained below, a tri-party repo involves a clearing bank, which stands between the lender and borrower of a repo transaction and takes custody of the collateral.

⁴For the most part, price discovery in credit markets now takes place in the trading of CDS indices and of component parts called “loss tranches.” The spreads on these indices and their loss tranches in turn drive spreads on single-name CDS contracts as well as prices of CDO tranches. The most common pricing models in these markets attempt to account for default correlations in an ad hoc way, typically through a “Gaussian copula.” See, for example, Duffie and Singleton (2003, pp 237-42).

⁵The Committee on the Global Financial System (2008) provided a comprehensive review of these operations by the major central banks. Hilton (2008) provided a similarly comprehensive review of monetary operations by the US Federal Reserve.

⁶See Almantier, Krieger, and McAndrews (2008) for a more comprehensive discussion.

⁷The Basel II framework describes a more comprehensive measure and minimum standard for capital adequacy that national supervisory authorities are now working to implement through domestic rule-making and adoption procedures. A comprehensive description can be found in Basel Committee on Banking Supervision (2006).

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