We develop a reduced-form model that allows us to decompose bond spreads and CDS premia into a pure credit risk component, a pure liquidity component, and a component measuring the relation between credit risk and liquidity. CDS liquidity has important consequences for the bond credit risk and...

We analyze the impact of market frictions on trading volume and liquidity premia for finite maturity assets when investors differ in their investment horizons. In equilibrium, illiquidity spills over from short-term to long-term assets and trading concentrates on assets of intermediate maturity....

We analyze the impact of market frictions on trading volume and liquidity premia of finite maturity assets when investors differ in their investment horizons. In equilibrium, short-horizon investors only invest in short-term assets and illiquidity spills over from short-term to long-term...

We analyze the impact of market frictions on trading volume and liquidity premia of finite maturity assets when investors differ in their trading needs. Our equilibrium model generates a clientele effect (frequently trading investors only hold short-term assets) and predicts i) a hump-shaped...

We analyze the impact of market frictions on trading volume and liquidity premia of finite maturity assets when investors differ in their trading needs. Our equilibrium model generates a clientele effect (frequently trading investors only hold short-term assets) and predicts i) a hump-shaped...

Diversification benefits depend on the correlation between assets. Unfortunately, asset correlation increases when it is most needed. We examine bond correlation using a broad sample of US corporate bonds. We find bond correlation to be higher during the financial crisis in 2008. Increased bond...

We study the response of bond spreads to a liquidity supply shock in the credit default swap (CDS) market. Our identification strategy exploits the exogenous exit of a large dealer from the single-name CDS market as well as granular data on CDS transactions and bond portfolio holdings of German...

We study the impact of transparency on liquidity in OTC markets. We do so by providing an analysis of liquidity in a corporate bond market without trade transparency (Germany), and comparing our findings to a market with full posttrade disclosure (the U.S.). We employ a unique regulatory dataset...