This paper studies liquidity risk contagion within the interbank market by assessing the long-run relationship of short-term interest rate spreads from January 2002 to December 2015. In particular, we model the interaction between the LIBOR-OIS spread, euro fixed-float OIS swap rate and the...

We develop a model in which margin procyclicality and the propensity for liquidity hoarding interact to generate a systemic liquidity crisis. In this model, banks lend and borrow in the interbank market to mitigate liquidity risk and trade derivatives contracts in the OTC derivatives market to...

We develop a macroprudential stress test to assess the resilience of banking systems. The proposed approach integrates liquidity risk and solvency risk and provides a convenient method to estimate the change in both of them based on the evolution of financial distress within the banking system....

This paper investigates liquidity spillovers between the US and European interbank market during turbulent and tranquil periods. We show that an endogenous model with time-varying transition probabilities is effective in describing the propagation of liquidity shocks within the interbank market,...

This study investigates an early warning indicator for liquidity shortages in the short-term interbank market. To identify structural breaks and their persistence, an autoregressive two-state regime switching model is presented. The variability in the LIBOR-OIS spread along with thresholds,...