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Illiquidity Contagion and Liquidity Crashes

Cespa, Giovanni - 2014

Liquidity providers often learn information about an asset from prices of other assets. We show that this generates a … self-reinforcing positive relationship between price informativeness and liquidity. This relationship causes liquidity … spillovers and is a source of fragility: a small drop in the liquidity of one asset can, through a feedback loop, result in a …

Persistent link: https://www.econbiz.de/10013068308

Default Contagion in a Two-Tree Economy

Ericsson, Jan; Jeanneret, Alexandre; Lu, Yiliu - 2021

We propose an explanation for default contagion based on a Lucas model with two independent debt-financed trees. The transmission mechanism is that variations in the size of one tree impact the level of risk premium and the default decision for all borrowers. If a negative shock hits one tree,...

Persistent link: https://www.econbiz.de/10013229878

A Default System with Overspilling Contagion

Coculescu, Delia - 2017

In classical contagion models, default systems are Markovian conditionally on the observation of their stochastic environment, with interacting intensities. This necessitates that the environment evolves autonomously and is not influenced by the history of the default events. We extend the...

Persistent link: https://www.econbiz.de/10012947202

A Default System with Overspilling Contagion

Coculescu, Delia - 2017

Persistent link: https://www.econbiz.de/10012951738

Contagion between liquid and illiquid assets during the financial crisis: evidence from the US credit derivative market

Kim, Jungmu; Park, Yuen Jung - In: Journal of derivatives and quantitative studies : … 28 (2020) 3, pp. 107-122

was incorporated first into the LCDSs because of the flight-to-liquidity during the recent crisis period but there is a …

Persistent link: https://www.econbiz.de/10012592651

Financial Contagion Risk and the Stochastic Discount Factor

Piccotti, Louis R. - 2017

I provide evidence that financial contagion risk is an important source of the equity risk premium. Banks' contributions to aggregate financial contagion are estimated in a state space framework and linked to systemic risk. Greater bank connectedness today leads to increased systemic risk 3-12...

Persistent link: https://www.econbiz.de/10012973399

Fluctuating Attention and Financial Contagion

Hasler, Michael - 2018

Financial contagion occurs when return and volatility transmit between fundamentally unrelated sectors. Our equilibrium model shows that contagion arises because investors pay fluctuating attention to news. As a negative shock hits one sector, investors pay more attention to it. This raises the...

Persistent link: https://www.econbiz.de/10012937546

CDS central counterparty clearing liquidation : road to recovery or invitation to predation?

Tywoniuk, Magdalena - 2017

well as, regulatory implications for a Lender of Last Resort in various liquidity scenarios …

Persistent link: https://www.econbiz.de/10011870658

CDS central counterparty clearing default measures : road to recovery or invitation to predation?

Tywoniuk, Magdalena - 2020

theoretical results with parameter magnitudes and sensitivities. Examination of three market liquidity scenarios provides … intuition for effective liquidity injection by a Lender of Last Resort …

Persistent link: https://www.econbiz.de/10012419635

Liquidity Shocks and Hedge Fund Contagion

Boyson, Nicole M. - 2012

returns. We then show that large adverse shocks to asset and funding liquidity strongly increase the likelihood of this … linked to liquidity shocks, especially for small-cap domestic equities, Asian equities, high yield bonds, and the Australian …

Persistent link: https://www.econbiz.de/10013114577