regulations, intermediaries provide no risk sharing because of an externality arising from arbitrage opportunities. We identify a … simple regulation -- a liquidity requirement -- that corrects such an externality by affecting the interest rate on the … markets. We characterize the form of the optimal liquidity adequacy requirement for a general class of preferences. We show …

We consider a model of liquidity demand arising from a possible maturity mismatch between asset revenues and … consumption. This liquidity demand can be met with either cash reserves (inside liquidity) or via asset sales for cash (outside … liquidity). The question we address is, what determines the mix of inside and outside liquidity in equilibrium? An important …

We analyze the contractual relation between workers and their employers when there is nominal risk. The key feature of … eliminate all nominal risk for the parties (by fully indexing the terms of the contracts to the price level) but they would be … re-negotiated. Foreseeing this, the parties to the contract will write one that is renegotiation-proof. Under such a …

We study an endowment economy in which agents face income risk, as if uncertain returns on a portfolio, and agents can … only make transfers in states when they are actively participating in the market. Besides income risk, agents also have … connections may serve to dissipate shocks, they may also provide obstacles to the sharing of risk, as when participation frictions …

Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The … liquidity insurer is not one of the passive recipient, but of an active seeker, of deposits. We find that banks facing a funding … liquidity demand shocks (as measured by their unused commitments, wholesale funding dependence, and limited liquid assets), as …

similar estimates of the liquidity risk premium. In the sample period after our study, the liquidity risk premium estimates … the results in Pástor and Stambaugh (2003). Both studies successfully replicate our market-wide liquidity measure and find … are even larger, and the liquidity measure displays sharp drops during the 2008 financial crisis. We respond to both …

This paper studies liquidity risk at the six largest U.S. banks. The starting point is the stress tests performed under … the Liquidity Coverage Ratio (LCR) regulation, which compare a bank's liquid assets to its loss of cash in a stress … liquidity crisis for 30 days without running out of cash. This paper argues, however, that some of the assumptions in the LCR …

differences in "preferences and technologies." Large banks offer superior liquidity services but lower deposit rates, and locate …

Liquidity risk in banking has been attributed to transactions deposits and their potential to spark runs or panics. We … show instead that transactions deposits help banks hedge liquidity risk from unused loan commitments. Bank stock …. This deposit-lending risk management synergy becomes more powerful during periods of tight liquidity, when nervous …