This paper summarizes the papers that were presented at the Liquidity in Frictional Markets conference in November 2008. The papers, which looked at markets for assets as diverse as houses, bank loans, and electronic funds transfer, all explored that amorphous concept called “liquidity” and...

Financial crises remain a recurring problem despite, or perhaps, as some suggest, because of, extensive innovation in capital markets over the past several decades. Crisis interventions are fraught with trade-offs: What are the costs of doing nothing? What is the probability that markets will...

Toxic waste refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who...