The paper reports the outcome of the stress-testing of liquidity risk in the TARGET2 payment system, with the study having been conducted by an ad-hoc group composed of operators and overseers of TARGET2. The study aims to assess the resilience of the system, defined as the network of its...

Since the global financial crisis, economic literature has highlighted banks' inclination to bolster up their liquid asset positions once the aggregate interbank funding market experiences a dry-up. To this regard, we show that liquidity hoarding and its detrimental effects on credit can also be...

We merge the literature on downside return risk and liquidity risk and introduce the concept of extreme downside liquidity (EDL) risks. The cross-section of stock returns reflects a premium if a stock's return (liquidity) is lowest at the same time when the market liquidity (return) is lowest....

As liquidity problems of some banks during global financial crisis reemphasized, liquidity is very important for functioning of financial markets and the banking sector. The aim of this paper is therefore to evaluate comprehensively the liquidity positions of Polish commercial banks via five...

Fleckenstein et al. (2014) document that nominal Treasuries trade at higher prices than inflation-swapped indexed bonds, which exactly replicate the nominal cash flows. We study whether this mispricing arises from liquidity premiums in inflation-indexed bonds (TIPS) and inflation swaps. Using US...

In responding to the severity and broad scope of the financial crisis that began in 2007, the Federal Reserve has made aggressive use of both traditional monetary policy instruments and innovative tools in an effort to provide liquidity. In this paper, I examine the Fed's actions in light of the...

The small decline in the value of mortgage-related assets relative to the large total losses associated with the financial crisis suggests the presence of financial amplification mechanisms, which allow relatively small shocks to propagate through the financial system. We review the literature...

We investigate whether idiosyncratic interbank funding shocks affecting a bank headquarters can trigger a liquidity hoarding reaction by their regional branches. Shock-affected branches of Brazilian banks increase liquid assets and cut lending in the shocks' aftermath compared to non-affected...

The credit crisis and the following sovereign debt crisis during 2007 and 2012 led to an increasing volatility of European corporate bond credit spreads. European investment grade credit spreads rose in 2007 and 2008 from 50 BP to over 350 BP. In the years after the credit spreads declined to...

This paper aims to identify determinants of liquidity among Hungarian commercial banks. The data cover the period from 2001 to 2010. Results of panel data regression analysis show that bank liquidity is positively related to capital adequacy of banks, interest rate on loans and bank...