Banks are liquidity brokers: they acquire it at the market in form of deposits and lend it in form of loans. As liquidity is not for free, the costs of its acquisition have to be transferred to those (departments) that lend it. Furthermore, banks take liquidity risk. The costs to hedge this risk...

We provide a modeling framework for banks' business planning under Basel III. For this purpose, we write banks' planning as formal optimization problem where Basel III - minimum requirements/ratios enter as constraints. We analyze the effect of Basel III on the banks' product mix for a...

Liquidity is a key resource that banks have to manage on a daily basis. Large banking groups face the question of how to optimally allocate and generate liquidity: in a central liquidity hub or in many decentralized branches across different time zones, jurisdictions, and FX zones. We rephrase...

We provide a structural framework to study the impact of a macroeconomic shock on the banking sector's lending capacity. Our model consists of three building blocks: first, the evolution of non-bank assets that provide the entrance point for shocks from the real economy into the banking sector....

This working paper surveys theoretical and empirical work about market liquidity and market liquidity risk. It addresses interested practitioners as well as students who want to gain a quick overview about the latest progress in research in market liquidity.