Shadow banks typically fund their assets by issuing liabilities of shorter maturity that are close substitutes for bank deposits The maturity mismatch between their assets and liabilities creates rollover risk that can trigger fire sales and systemic disruption Plot the outstanding level of one suc...

The plot appears below From 2005 to the summer of 2007 shadow banks increasingly relied on the issua ...

Shadow banks typically fund their assets by issuing liabilities of shorter maturity that are close substitutes for

Question:

Shadow banks typically fund their assets by issuing liabilities of shorter that are close substitutes for bank deposits. The mismatch between their assets and liabilities creates rollover risk that can trigger fire sales and systemic disruption. Plot the outstanding level of one such liability – asset-backed commercial paper (FRED code: ABCOMP) – from the start of 2002 to the end of 2007. Based on the plot, discuss how the use of asset-backed commercial paper influenced the financial crisis of 2007-2009?

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...