Brunnermeier, Markus K; Pedersen, Lasse Heje - C.E.P.R. Discussion Papers - 2007
We provide a model that links an asset's market liquidity - i.e., the ease with which it is traded - and traders …' funding liquidity - i.e., the ease with which they can obtain funding. Traders provide market liquidity, and their ability to … are charged, depend on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and …