connections 3merges from idiosyncratic liquidity shocks. Banks initially choose potential trading partners randomly, but form … banks mediating between the liquidity needs of many smaller banks. Statistical analysis shows that this evolving interbank …

network. We first provide a characterization of the unique equilibrium of banks' liquidity holdings for any network of credit … aggregate liquidity holdings. This incurs an implicit cost, since these funds could be invested in the more productive illiquid …

In this paper, we focus on the interconnectedness of banks and the price they pay for liquidity. We assess how the … to meet its liquidity demand. We use quarterly data of bilateral interbank credit exposures between all German banks from …’s willingness to pay for liquidity since they had variable rate tenders with a “pay-your-bid” price. Controlling for bank …

study liquidity reallocation in this interbank network using a novel dataset of all interbank loans settled between European … banks. We show the existence of a centrality premium when banks act as intermediaries of liquidity: banks with a one …

reinforce each other to withdraw interbank lending. Banks' individually precautionary liquidity hoarding strategies are …-wide liquidity crunches, as if the interactions are centralized. Local insolvency shocks trigger the interbank run if the network is …

-the-counter markets for liquidity in Germany: the interbank market for credit and for derivatives. We use end-of-quarter data from the …

This paper aims to shed light on the systemic nature of liquidity risk and to propose a method for calculating systemic … liquidity shortages. Our method incorporates not only direct liquidity shortages but also indirect liquidity shortages due to … a deficit bank can mitigate a liquidity shortage by holding more claims on a surplus bank. Meanwhile, a greater …

This paper aims to shed light on the systemic nature of liquidity risk and to propose a method for calculating systemic … liquidity shortages. Our method incorporates not only direct liquidity shortages but also indirect liquidity shortages due to … a deficit bank can mitigate a liquidity shortage by holding more claims on a surplus bank. Meanwhile, a greater …

We formulate a model of the banking system in which banks control both their supply of liquidity, through cash holdings …, and their exposures to risky interbank loans. The value of interbank loans jumps when banks suffer liquidity shortages …, which can be caused by the arrival of large enough liquidity shocks. In two distinct settings, we compute the unique optimal …