We document the fact that at both the aggregate and the firm level, corporations tend to simultaneously raise external finance and accumulate liquid assets. For all but the very largest firms, the aggregate correlation between external finance raised and liquidity accumulation is 0.6, and the...

This paper develops a search and matching model of an over-the-counter market for credit derivatives. In equilibrium, the large volume of bilateral trade creates a network of credit exposures in which banks are linked together by a complex liability structure, with gross credit exposures that...