illiquid assets or underprovision of liquidity. We investigate whether imperfect competition (Cournot) improves welfare through … internalizing the externality and find that this is far from guaranteed. In a standard model of liquidity shocks, when liquidity is … sufficiently scarce, Cournot competition leads to even less liquidity than the Walrasian equilibrium. In a standard model of …

aggregate liquidity shocks and firms against losing liquidity at will of banks. During aggregate liquidity shocks, banks need to … ration liquidity, and covenants allow banks to revoke credit lines if firms' accounting-performance measures fall below a … threshold. Thereby, accounting covenants constrain banks' discretion in rationing liquidity in a systematic way. Transitory …

I study rollover risk in the wholesale funding market when intermediaries can hold liquidity ex-ante and are subject to … fire sales ex-post. I demonstrate that precautionary liquidity restores multiple equilibria in a global rollover game. An … intermediate liquidity level supports both the usual run equilibrium and an efficient equilibrium. I provide a uniqueness …

In this paper we introduce two measures, the Systemic Liquidity Buffer (SLB) and the Systemic Liquidity Shortfall (SLS …) to assess liquidity in the banking system. The SLB takes an aggregated perspective on liquidity risks in the banking … system. In contrast, the SLS focusses on the problematic banks which suffer a liquidity shortfall. These measures provide an …

We analyze the determinants of individual bank failures arising from solvency and liquidity shortages in a stylized … arising from solvency and liquidity shortages …

We propose a novel theory of banks' liquidity management and financial fragility. Banks hold liquidity and an illiquid … depositors are sufficiently risk averse, banks manage their liquidity needs during runs following an endogenous pecking order …: they first deplete liquidity, and then liquidate the productive asset. Thus, under these conditions banks subject to runs …

In this paper, based on Acharya and Pedersen's overlapping generation model, we show that liquidity risk could … influence the market risk forecasting through at least two ways. Then we argue that traditional liquidity adjusted VaR measure …, the simply adding of the two risk measure, would underestimate the risk. Hence another approach, by modeling the liquidity …

We study the endogenous determination of corporate debt maturity in a setting with default risk. We assume that firms … projects with positive but small net present value, firms may be forced to default in the first phase. We call this liquidity … risk. The technology is such that earnings can switch to a higher (but riskier) level. In this second phase firms have …

An epidemiologist calculating the risk of a localised epidemic becoming a global pandemic would investigate every … contact would underestimate the pandemic risk if the disease could also spread through the air. Likewise, calculating the … quantity of financial system risk requires practitioners to understand all of the channels through which small and local shocks …

We study the role of liquidity management tools (LMTs) in mitigating financial fragility in investment funds during the …