driving asset prices to ‘overshoot’ equilibrium when an asset bubble bursts - threatening widespread insolvency and what …

are positively related to credit risk, resulting in a positive correlation between cash and spreads. In contrast, spreads … are negatively related to the ``exogenous'' component of cash holdings that is independent of credit risk factors … liquidity may be related positively to the longer-term probability of default. Our empirical analysis confirms these predictions …

small default risk. Our model explains why markets for rollover debt, such as asset-backed commercial paper, may experience …

a larger debt capacity and bears lower credit risk premia than privately held debt. We derive simple closed …

assess and price the risk of default. In order to analyse default risk in the macroeconomy, a simple general equilibrium … model with banks and financial intermediation is constructed in which default-risk can be priced. It is shown how the credit … spread can be attributed largely to the risk of default and how excess loan creation may emerge due different attitudes to …

. Lack of liquidity means that an asset cannot be immediately traded at any point in time. We find the portfolio share of … financial wealth invested in illiquid assets given the liquidity premium. Benchmark calibrations imply a portfolio share of 2 … asset classes unrelated to standard price risk may influence portfolio shares. …

This paper examines the extent to which individual investors provide liquidity to the stock market, and whether they … predict short-term future returns is significantly enhanced during times of market stress, when market liquidity provisions … uncertainty. Despite this high aggregate performance, individual investors do not reap the rewards from liquidity provision …

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

expected returns are hump-shaped. Liquidity is a priced risk factor: assets that suffer the most when liquidity decreases, e …We develop a dynamic model of liquidity provision, in which hedgers can trade multiple risky assets with arbitrageurs …. We compute the equilibrium in closed form when arbitrageurs' utility over consumption is logarithmic or risk-neutral with …

, 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 … markets, liquidity in each market generally becomes less volatile, but the reverse may hold for aggregate liquidity because of …