Shadow banks play an important role in the modern financial system and are arguably the source of key vulnerabilities that led to the 2007-2009 financial crisis. I develop a quantitative framework with uncertainty fluctuations and endogenous bank default to study the dynamics of shadow banking....

How liquidity risk (beta) gets compensated is not well addressed so far. I hypothesize that liquidity risk (beta) get compensated asymmetrically. In this paper, I pay special attention to the crisis periods which experience large negative shocks on the market liquidity to study the nature of...