This paper studies predatory trading: trading that induces and/or exploits other investors´ need to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset.(...)

We provide a model that links an asset's market liquidity - i.e., the ease with which it is traded - and traders' funding liquidity - i.e., the ease with which they can obtain funding. Traders provide market liquidity, and their ability to do so depends on their availability of funding....