schemes affect liquidity provision and asset prices. Investors face a trade-off between risk and return. At the benefit of a … liquidity provision to force traders to trade at a lower price. By contrast, bonus caps make traders value the asset less than … investors. This should encourage liquidity provision and decrease prices. In contrast to these predictions, we find that under …

policy and therefore ultimately the real economy. In particular, it facilitates banks' liquidity management. This paper aims … at extending the literature which views interbank markets as mutual liquidity insurance mechanism by taking into account … persistence of liquidity shocks. Following a theory of long-term interbank funding a financial system which is modeled as a micro …

liquidity premium. This approach gives a better estimate of the default premium than mid quotes, and it allows to disentangle … and compare the liquidity premium earned by the protection buyer and the protection seller. In contrast to other studies …, our model is structurally much simpler, while it also allows for correlation between liquidity and default premia, as …

long run fragility. We build a macro model with banks subject to incentive problems and liquidity risk (in the form of … liquidity based banks' runs) which provides a link between endogenous bank capital and macro and policy risk. Our banks also … invest in risky government bonds used as capital buffer to self-insure against liquidity risk. The model can replicate the …