Musings on liquidity -- Financial crises and liquidity traffic jams -- Market structures and institutional arrangements of trading -- Asset pricing and liquidity models -- Stories of liquidity and credit -- Financial regulation and liquidity risk management

The paper focuses on the interaction between the solvency probability of a banking firm and the diversification potential of its asset portfolio when determining optimal equity capital. The purpose of this paper is to incorporate value at risk (VaR) into the firm-theoretical model of a banking...