We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value by making their financing, liquid asset holdings, and...

We analyze the question whether and when access to refinancing via repurchase agreements as opposed to asset liquidation increases efficiency to financial intermediators ('banks'). By pledging assets in form of a repo contract the bank can raise cash, by this preventing to forgo returns on sold...

This paper examines bank risk and its main determinants when gauged at various bank threshold variables. We apply the dynamic panel threshold estimation technique developed by Seo and Shin (2016) to a panel of 3,109 commercial banks in the United States during 2005–2019. A novel instrument is...

We study efficiency properties of competitive economies in which banks provide liquidity insurance and interact on secondary asset markets. While all banks are subject to extrinsic risk, a bank's portfolio choice determines whether it is prone to a bank run in one of the extrinsic states. Asset...

We analyze the determinants of individual bank failures arising from solvency and liquidity shortages in a stylized banking system following Krause and Giansante (2012) where banks are characterized by the amount of capital, cash reserves and their exposure to the interbank loan market as...

Short-term debt is commonly used to fund illiquid assets. A conventional view asserts that such arrangements are run-prone in part because redemptions must be processed on a first-come, first-served basis. This sequential service protocol, however, appears absent in the wholesale banking...

Diamond and Dybvig (1983) is commonly understood as providing a formal rationale for the existence of bank-run equilibria. It has never been clear, however, whether bank-run equilibria in this framework are a natural byproduct of the economic environment or an artifact of suboptimal contractual...

Diamond and Dybvig (1983) is commonly understood as providing a formal rationale for the existence of bank-run equilibria. It has never been clear, however, whether bank-run equilibria in this framework are a natural byproduct of the economic environment or an artifact of suboptimal contractual...