. Such a funding-liquidity crisis gives rise to "bases," that is, price gaps between securities with identical cash-flows but …

over faster than domestic assets because the former have desirable liquidity properties, but represent inferior saving …

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 …

overshooting and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed …