Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about … when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they … compensation for the illiquidity investors will be subject to. We argue that banks can resolve these liquidity problems that arise …

times; and (v) pay higher spreads, even conditional on other firm characteristics. We present a theory of loan terms that …'s prediction that small firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID … recession. Consistent with the theory, the increase in bank credit in 2020Q1 and 2020Q2 came almost entirely from drawdowns by …

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 …

panics or ex ante contractual links between banks, we argue bank failures can shrink the common pool of liquidity, creating … or exacerbating aggregate liquidity shortages. This could lead to a contagion of failures and a possible total meltdown …, liquidity problems and solvency problems interact and can cause each other, making it hard to determine the root cause of a …

Banks can fail either because they are insolvent or because an aggregate shortage of liquidity can render them … insolvent. We show that bank failures can themselves cause liquidity shortages. The failure of some banks can then lead to a … links between banks but because bank failure could lead to a contraction in the common pool of liquidity. There is a …

Banks are unique among financial institutions because they are the cheapest source of liquidity in the economy. Banks … liquidity. Since the cost of reserves falls on all issuers of less liquid liabilities seeking access to payment services …

monitor markets continuously. We study how limit order markets absorb transient liquidity shocks, which occur when a …

Extreme market outcomes are often followed by a lack of liquidity and a lack of trade. This market collapse seems …-returns distribution. To explore the connection of uncertainty with liquidity, we specify a simple market where a monopolist financial … increase the bid-ask spread and, hence, reduces liquidity. In addition, 'hedge portfolios'' for the market-maker, an important …