value of another related asset due to information arrival. These opportunities are toxic because they expose liquidity … arbitrageurs' response to these opportunities impair liquidity. We find support for these predictions using high frequency …

We investigate the relation between global foreign exchange (FX) volatility risk and the cross-section of excess … FX volatility and thus deliver low returns in times of unexpected high volatility, when low interest rate currencies … provide a hedge by yielding positive returns. Our proxy for global FX volatility risk captures more than 90% of the cross …

In a market with short term agents and heterogeneous information, when liquidity trading displays persistence, prices … reflect average expectations about fundamentals and liquidity trading. Informed investors exploit a private learning channel … to infer the demand of liquidity traders from the order flow to anticipate the evolution of the future aggregate demand …

a novel dataset, we document that this sell-off appears to have generated significant liquidity risk for market … actual downgrade and reversing sharply thereafter. We show that a measure of liquidity risk faced by corporate bond market … portion of this excess co-movement. Additional robustness checks suggest that this relationship between the liquidity risk …

rationed when they attempt to borrow in order to meet liquidity shocks. The rationed firms can optimally pledge cash as …-in-the-market pricing and depends on the entire distribution of liquidity shocks in the economy. As moral hazard intensity varies … market and funding liquidity and deep discounts observed in prices during crises that follow good times. …

liquidity is inefficient. The reason is that liquidity affects prices and the welfare of others, and creators do not internalize … government must restrict the creation of liquidity by the private sector. …

During the recent financial crisis, central banks have provided liquidity and governments have set up rescue programmes … bank suffering from liquidity shocks, we find that the unregulated bank keeps too much liquidity and monitors too little. A … central bank can alleviate the liquidity problem, but induces moral hazard. Therefore, we introduce an additional authority …