We discuss the notion of liquidity and liquidity risk within the financial system. We distinguish between three … different liquidity types, central bank liquidity, funding and market liquidity and their relevant risks. In order to understand … the workings of financial system liquidity, as well as the role of the central bank, we bring together relevant literature …

This paper discusses how to introduce liquidity into the well known mean-variance framework of portfolio selection … using a representative sample of Spanish equity portfolios. Either by estimating mean-variance liquidity constrained … frontiers or directly estimating optimal portfolios for alternative levels of risk aversion and preference for liquidity, we …

confined to project initiation, I find that: (1) when agents expect a liquidity dry-up on such markets, they optimally choose … as it reduces ex-post market participation, which worsens adverse selection and dries up market liquidity; (3) liquidity … idiosyncratic, privately known, illiquidity shocks, I show that: (5) it increases market liquidity; (6) illiquid agents are better …

systematic liquidity risk increased by 34%. We find that the trading of a firm's equity by institutional investors increased the … firms' quoted spreads, and led to a higher liquidity commonality during the crisis. Institutional sell-side herding …

Liquidity occupies a central importance for many areas of finance. But there are very disparate views of liquidity, and … correspondingly many different policy implications attached to these views. In this paper, I consider the many faces of liquidity and … their implications for financial market stability. In particular, I focus on the traditional economics view of liquidity as …

uncertainty regarding their liquidity needs. This paper examines the efficiency of the interbank lending market in allocating … funds and the optimal policy of a central bank in response to liquidity shocks. We show that, when confronted with a … distributional liquidity-shock crisis that causes a large disparity in the liquidity held by different banks, a central bank should …