I use Forex trading data to study how risks associated with the lack of liquidity contribute to the dynamics of 17 spot … exchange rates through their time-varying contributions to risk premia. I find that liquidity risk matters. All the foreign … exchange risk premia compensate investors for exposure to liquidity risk; and, for many currencies, exposure to liquidity risk …

ratio captures a risk premium for the illiquidity of the dealer system that is due to the time-varying market liquidity of …

We generate large liquidity premia endogenously from the interaction of transaction costs with convexity in preferences …

This paper examines the effects of bond liquidity on firms' investments. We postulate that bond liquidity increases … variation in liquidity generated by the introduction of TRACE, we find that bond liquidity enables firms to expand capital … expenditures and acquisition activity. Furthermore, by enhancing access to funding, bond liquidity facilitates acquisition …

Previous studies find as the VIX goes up, the return and the Sharpe ratio on liquidity provision increase. We argue … for providing liquidity, (2) when assets are volatile, liquidity shocks create stronger trading demands and thus liquidity … demanders pay a higher premium, and (3) when assets are highly correlated, the higher risk of spillover of liquidity shocks …

We show that commonality in liquidity is priced in both the cross-section and time-series of credit default swap (CDS … individual CDS illiquidity co-moving with CDS market illiquidity. The pricing of commonality in CDS liquidity is different for … calm and crisis periods as we find liquidity risk to be a priced factor in CDS spreads only during the recent financial …