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 …

This Paper solves explicitly a simple equilibrium asset pricing model with liquidity risk – the risk arising from … unpredictable changes in liquidity over time. In our liquidity-adjusted capital asset pricing model, a security’s required return … depends on its expected liquidity as well as on the covariances of its own return and liquidity with market return and market …

liquidity may be related positively to the longer-term probability of default. Our empirical analysis confirms these predictions …

This Paper studies equilibrium asset pricing with liquidity risk (the risk arising from unpredictable changes in … liquidity over time). It is shown that the required return on a security depends on its expected illiquidity, the covariances of … its own return, illiquidity with market return, and market illiquidity. This gives rise to a liquidity-adjusted capital …

In August of 2007, banks faced a freeze in funding liquidity from the asset-backed commercial paper (ABCP) market. We … investigate how banks scrambled for liquidity in response to this freeze and its implications for the real economy. Commercial …