We consider the finite-time optimal portfolio liquidation problem for a von Neumann-Morgenstern investor with constant absolute risk aversion (CARA). As underlying market impact model, we use the continuous-time liquidity model of Almgren and Chriss (2000). We show that the expected utility of...

Following the 2008 financial crisis, regulation mandates the clearing of the CDS market through Central Clearing Counter-parties (CCPs). Large CCPs are now designated as 'Global Systemically Important Institutions' (GSIIs), whose unlikely-but-plausible failure threatens global financial market...

Recently, for standard asset classes, the first mutual clearing agreements between Central Coun- terparties (CCPs) have come into existence. There are already global concerns over the unique threats and benefits which arise from these situations, and further concern for an extension of agree-...

We document new intraday trading patterns indicative of the key roles of endogenous trading responses of investors to variations in imperfectly-competitive liquidity provision. When measured in trade times of fixed dollar values, price impacts and volatility fall sharply from open to close, and...

Recent regulation, mandating the clearing of credit default swaps (CDS) by a Central Clearing Counterparties (CCP), has rendered it's possible failure a serious threat to global nancial stability. This work investigates the potential failure of a CCP initiated by the default of a large dealer...

Using a search-based trading model, we show that either an illiquidity price premium or discount can arise between two assets with identical fundamentals. Liquidity between the two assets diverges endogenously in a self-reinforcing manner as trading is concentrated in the more liquid asset. When...

Which corporate bond's yield is more exposed to search frictions? Is the exposure correlated with dealers' inter-mediation? We propose a measure of bond's mis-allocation among dealers and show its correlation with bond's liquidity risk which is attributed to search frictions. This measure is...

Regulations have unanticipated consequences for liquidity in the corporate bond market. In this paper, I show that while the bid-ask spread has been declining, corporate bond liquidity premium has actually increased since the financial crisis. The cross-sectional variation in the corporate bond...

Recent regulatory reforms like the mandatory clearing of standardized swap contracts and mandatory trading on centralized execution platforms have significantly changed the derivatives landscape. These reforms have, in certain cases, led the market to increasingly trade on multilateral...

The Lehman Brothers' 2008 bankruptcy spread losses to its counterparties even when Lehman was a lender of cash, because collateral for that lending was tied up in the bankruptcy process. I study the implications of such lender default using a general equilibrium network model featuring...