under which arbitrageurs take excessive or too little risk. …

Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The … liquidity insurer is not one of the passive recipient, but of an active seeker, of deposits. We find that banks facing a funding … liquidity demand shocks (as measured by their unused commitments, wholesale funding dependence, and limited liquid assets), as …

withdrawal of employers and external insurers as risk bearers of systematic financial and longevity risks. Partly because of … pension: the Personal Pension with Risk sharing (PPR). By unbundling and valuing the investment, (dis)saving, insurance and … risk-sharing functions of pensions, PPRs allow risk management and (dis)saving to be customized to the specific features of …

large amount of aggregate tail risk is missing from the price of financial sector crash insurance during the financial …

market-restricting approach to regulation; it would imply price-based capital and liquidity regulation, rather than … restrictions and prohibitions; it would focus on forcing financial institutions to internalize the external costs of their risk …-taking decisions rather than suppressing financial innovation. Beyond changes in the capital and liquidity requirements and corporate …

liquidity provision by hedge funds to noise traders to rationalize our findings, and empirically verify auxiliary predictions of …

, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing … so provide liquidity to investors. A collateral constraint limits their positions as a function of capital. We show that … the dynamics of arbitrage activity are self-correcting: following a shock that depletes arbitrage capital, profitability …

test the relevance of this mechanism by exploiting the negative shock caused by Lehman Brothers’ bankruptcy in September …