We model a safe asset market with investors valuing safety, investors valuing liquidity, and constrained dealers. While … safety investors and liquidity investors can interact symbiotically with offsetting trades in times of stress, we show that … liquidity investors' strategic interaction harbors the potential for selffulfilling fragility. Surprisingly, standard flight to …

: undiversifiable interest rate risk and shocks to aggregate liquidity demand. Mutual funds are inefficient when the economy faces … undiversifiable interest rate risk. However, if only aggregate liquidity demand is stochastic, mutual funds can implement the social …I analyze welfare properties of mutual funds in the Diamond-Dybvig model with two sources of aggregate risk …

optimization, as well as liquidity risk, is crucial, as explained in the chapter “Theoretical and practical foundations of … liquidity-adjusted value-at-risk (LVaR): optimization algorithms for portfolio selection and management” of the recently …Over the past few days, alarm bells have been ringing for the risk of recession in the world’s leading economies …

Since the financial crisis, attention has focused on central counterparties (CCPs) as a solution to systemic risk for a … risk. -- Financial system regulation and policies ; Financial stability ; Payment, clearing, and settlement systems …

We investigate the channel through which fluctuations in the market liquidity of real-sector repo collateral cause … productive capital as repo collateral to fund the margin for their arbitrage positions. A tiny drop in the market liquidity of …), and can easily incur a simultaneous repo run and arbitrage crashes, where liquidity in several markets dry up altogether …

liquidity risk. Our analysis has implications for the impact on market prices of a potential withdrawal of liquidity supply by …'s interventions during different stages of the crisis in light of this literature. We interpret the Fed's early-stage liquidity … operate via increases in credit risk and the externality imposed by risky borrowers on safe ones. Finally, we provide new …

liquidity provision. Analysis of reversal strategies shows that the expected return from liquidity provision is strongly time … Ratios during times of high VIX. The results point to withdrawal of liquidity supply, and an associated increase in the … expected returns from liquidity provision, as a main driver behind the evaporation of liquidity during times of financial …