We propose and test a new channel that links funding liquidity risk and interest rates in short-term funding markets. Borrowers with high liquidity risk are willing to pay a markup to lock in their funding, independent of risk premiums demanded by lenders. We test the channel using unique...

Switching costs are a recognised issue in banking markets around the world, but in many countries, including New Zealand, regulators give them limited attention. This paper confirms the existence and relative importance of switching costs in the New Zealand banking market. We find seven...

We construct a model of a bank's optimal funding choice, where the bank negotiates with both safety-driven short-term bondholders and (mostly) risk-taking long-term bondholders. We establish that investor demands for safety create a negative relationship between the bank's capital choices and...

In this paper, we provide the first evidence of liquidity timing ability of mutual funds outside US. We propose a new model to study liquidity timing ability of mutual funds. The model matches the higher moment framework required for emerging market study. We find that on the average the mutual...

We examine the impact of banks' liquidity risk management on secondary loan sales. We track the dynamics of bank loan share ownership in the secondary market using data from the Shared National Credit Program, a credit register of syndicated bank loans administered by U.S. regulators. We analyze...

Chinese banks have sought ways to rapidly expand lending in light of strict regulatory mandates to reduce official lending and maintain high capital adequacy ratios. Through arbitraging capital risk weights, total lending has expanded while capital adequacy ratios have remained unchanged....

A non-normal stock return distribution is common in emerging markets. We propose a new liquidity timing model in a higher moment. Overall, fund managers are able to time the market-wide liquidity even in a higher moment environment. A co-skewness risk factor is statistically priced. High...

Belief mismatches can trigger endogenous credit constraints in short-term funding markets (Simsek (2013)), and if banks rely on the latter their risk taking can also be affected through different balance sheet channels (Dell'Ariccia et al. (2014)). Using proprietary data we propose a proxy for...

We examine how banks use loan sales to manage liquidity during periods of marketwide stress and the associated spillovers to market prices. We track the dynamics of loan share ownership in the secondary market using data from a U.S. supervisory register of syndicated loans. Controlling for loan...

This project considers repo market stress in September 2019. First, I find that the multiple causes of that market disruption suggest the need for more comprehensive review of liquidity policy frameworks. I then review recent proposals to prevent future repo funding disruptions, evaluating them...