I study rollover risk in the wholesale funding market when intermediaries can hold liquidity ex ante and are subject to fire sales ex post. Precautionary liquidity restores multiple equilibria in a global rollover game. An intermediate liquidity level supports both the usual run equilibrium and...

The severity and depth of the recent financial crisis hit many by surprise. Despite warning signs, the financial system seems to have been unable to aggregate existing information. As the events of Fall 2008 showed, many investors were caught off guard by the large number of banks collapsing...

This paper models the links between financial fragility, asset markets and monetary policy. It is shown, that central bank's concern about the cost of financial disruption generates an asymmetric response, thus contributing to the creation of an asset price bubble in an economy with a highly...