theoretical results with parameter magnitudes and sensitivities. Examination of three market liquidity scenarios provides … intuition for effective liquidity injection by a Lender of Last Resort …

well as, regulatory implications for a Lender of Last Resort in various liquidity scenarios …

. Instead, our results are in line with the hypothesis that a lower trading volume reduces liquidity, and thereby market quality …

consume liquidity when it is most needed, even when they are rewarded by the exchange to provide immediacy. The behavior of … traders provide liquidity instead of HFTs, taking advantage of the discounted price. We thus uncover a trade-o. between the … greater liquidity and efficiency provided by HFTs in normal times, and the disruptive consequences of their trading activity …

crashes. They actually consume liquidity when it is most needed, even if they are rewarded by the exchange to provide … crash. In their place, slow traders provide liquidity, taking advantage of the discounted price. We thus uncover a trade …-off between the greater liquidity and efficiency provided by designated market makers in normal times, and the disruptive …