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Securitization is a financial innovation that experiences a boom-bust cycle, as many other innovations before. This paper analyzes possible reasons for the breakdown of primary and secondary securitization markets, and argues that misaligned incentives along the value chain are the primary cause...
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Market liquidity is informative of future corporate defaults but in a nuanced way. A firm's probability of default … increases with market illiquidity only when the firm's funding liquidity is tight and/or solvency position is weak. Such …
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market liquidity over time, when dealer balance sheet utilization reaches sufficiently high levels, liquidity is much worse …
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