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...

This study aims to investigate the impact of banking-sector concentration on the banks' liquidity creation in GCC countries over the period from 2012 to 2018 by using a dynamic GMM panel procedure. The results suggest that increased bank competition reduces banks' liquidity creation across the...

We examine the dynamics of liquidity connectedness in the cryptocurrency market. We use the connectedness models of Diebold and Yilmaz (Int J Forecast 28(1):57-66, 2012) and Baruník and Křehlík (J Financ Econom 16(2):271-296, 2018) on a sample of six major cryptocurrencies, namely, Bitcoin...

This paper reviews the theoretical literature at the intersection of macroeconomics and finance to draw lessons on the connection between vulnerabilities in the financial system and the macroeconomy, and on how monetary policy affects that connection. This literature finds that financial...

This work uses financial markets connected by arbitrage relations to investigate the dynamics of price and liquidity discovery, which refer to the cross-instrument forecasting power for prices and liquidity, respectively. Specifically, we seek to understand the linkage between the cheapest to...

This article addresses the problem of pricing European options when the underlying asset is not perfectly liquid. A liquidity discounting factor as a function of market-wide liquidity governed by a mean-reverting stochastic process and the sensitivity of the underlying price to market-wide...

The post-crisis liquidity framework improves banking stability by imposing stricter liquidity requirements. However, consistent bank performance continues to be an essential factor in achieving this goal. This study examines the impact of the liquidity coverage ratio (LCR) on the profitability...

This paper reviews the theoretical literature at the intersection of macroeconomics and finance to draw lessons on the connection between vulnerabilities in the financial system and the macroeconomy, and on how monetary policy affects that connection. This literature finds that financial...

This paper reviews literature on the empirical relationship between vulnerabilities in the financial system and the macroeconomy, and how monetary policy affects that connection. Financial vulnerabilities build up over time, with both risk appetite and risk taking rising during economic...

Using transaction data from a US consumer payments diary, we revisit the credit card debt puzzle-a scenario in which consumers revolve credit card debt while also keeping liquid assets as bank account deposits. This scenario is very common: 42 percent of consumers in our sample were...

Electrochemical treatment is an efficient approach for urea-decontamination from aqueous media. Reliable electro-catalysts are therefore crucial for water decontamination applications. We introduce in this work a newly developed composite by modifying a nickel substrate with nickel oxide...

We show that the liquidation value of collateral depends on who is pledging it. We employ transaction-level data on overnight repurchase agreements (repo) and loan-level credit registry data on corporate loans. We find that borrowers on the repo market pay a 2.6 basis points rate premium when...

The influence of mathematical interfaces on the dynamics of viscoelastic thin liquid films bounded above by fluid-fluid interface and below by a horizontal solid plate is studied in this work. The present work allows for integration of both chemical and physical properties of the thin liquid...

By tracking the cumulative inventory position of all passive liquidity providers in the US equity market and matching each position with its offsetting trade, we construct a measure of profits to liquidity provision (realized profitability) and assess how profitability varies with the average...

In this work, the detailed rupture processes of a liquid film formed by a shocked drop-in-liquid were systematically studied using a numerical method combined with an experimental method. The numerical and experimental results were consistent. It was found that the rupture of the liquid film...

Central bank balance sheet expansion is financed by commercial banks. It involves not just a substitution of liquid central bank reserves for other assets held by commercial banks, but also a counterpart increase in commercial bank liabilities, such as short-term deposits issued to finance...

We propose a methodology to build and validate a composite indicator of the market liquidity of euro-area sovereign bonds. The indicator aggregates several metrics from different trading venues, with the aim of providing a comprehensive measurement of prevailing bond-market liquidity conditions...

In the onset of the COVID-19 crisis, central banks purchased large volumes of assets in an effort to keep markets operational. We model one such central bank, which purchases assets from dealers to alleviate balance sheet constraints. Asset purchases can prevent market breakdown, improve price...

We investigate the role of interbank liquidity in monetary policy transmission in India. We employ standard and dynamic panel regression methods to analyze data for 40 commercial banks during the period 1999-2018. We find a significant role of interbank liquidity in easing the negative impact of...

The effects of households' indebtedness on their house selling decisions, the implications of these decisions for default and the effects of policies intended to reduce the incentive to default are studied in a dynamic model with search in the housing market and defaultable long-term mortgages....

Recently, central banks around the world have relied mostly on nontraditional policy tools to stimulate economic activity. A distinctive example is the expansion of the size of central bank balance sheets through the purchase of long-term government securities. In this paper we analyze the...

Canonical theories of trading assume that financial asset payoffs are linear in their fundamentals.This study argues that the nonlinearity of equity and corporate bond payoffs (by virtue of their issuer’s solvency) has novel, important effects on their price formation. We show that informed...

Recently, central banks around the world have relied mostly on nontraditional policy tools to stimulate economic activity. A distinctive example is the expansion of the size of central bank balance sheets through the purchase of long-term government securities. In this paper we analyze the...

This study investigates the pattern of mothly liquidity and volatility of Taiwan stock market from January 1998 to December 2015. In this study, the market liquidity is measured as the reciprocal value of Amihud illiquidity. The empirical results by using the VAR approach show that the...

Banking sector faced the problem of liquidity and such problem drive banks towards the loss. Liquidity management is one of the techniques to optimize the profitability in the banks. For such analysis where the quarterly impact on liquidity on the Nepalese commercial banks were assessed....

The recent asset pricing evidence on the return-liquidity risk relationship is mixed and somewhat ambiguous. We re-evaluate the importance of market-wide liquidity and liquidity risk for equity pricing by taking the role of investor sentiment into account. Regarding the market-wide liquidity...

Central bank balance sheet expansion is financed by commercial banks. It involves not just a substitution of liquid central bank reserves for other assets held by commercial banks, but also a counterpart increase in commercial bank liabilities, such as short-term deposits issued to finance...

The closed economy macro literature has shown that a liquidity trap can result from the self-fulfilling expectation that future inflation and output will be low (Benhabib et al. (2001)). This paper investigates expectations-driven liquidity traps in a two-country New Keynesian model of a...

We investigate the effects of bank powers – regulatory permissions to engage in nontraditional activities – on liquidity creation, the most comprehensive measure of bank output. We find support for the empirical dominance of the synergies view over the scope diseconomies view. Additional...

We analyze the determinants of individual bank failures arising from solvency and liquidity shortages in a stylized banking system following Krause and Giansante (2012) where banks are characterized by the amount of capital, cash reserves and their exposure to the interbank loan market as...

This study examines the roles of funding liquidity in shaping the relationship between stock price synchronicity and equity market liquidity. We find that market liquidity and stock price synchronicity exhibit a downward-sloping relationship, contradicting the relative synchronicity hypothesis....

We develop a production based asset pricing model with financially constrained firms to explain the observed high equity premium and low risk-free rate volatility. Investment opportunities are scarce and firms face productivity and liquidity shocks. A negative liquidity shock forces firms to...

Empirical studies on the tokenization of real asset markets are necessary to better understand the potential and limitations of this radically new organization of financial markets. We examine the financial economic consequences of the tokenization of 58 residential rental properties in the...

We show that wholesalers internalize unbalanced amounts of retail order flow to provide liquidity to institutional investors. The Tick Size Pilot highlights how wholesaler incentives affect the magnitude and composition of internalized retail trade imbalances (Mroib, Boehmer et al.\ 2021). Large...

Stock-level liquidity shocks not only affect the transaction costs institutional investors face but also generate mispricing opportunities. We find that institutions increase (decrease) their trading intensity when liquidity improves (declines). Further, active institutions trade to take...

This study documents properties of market-wide corporate bond liquidity and demonstrates that liquidity risk is an important determinant of returns. During market downturns, transaction costs rise for sellers and fall for buyers. The negative relation between buyer and seller liquidity motivates...

This paper examines the optimal allocation of risk across generations whose savings mix is subject to illiquidity in the form of uncertain trading costs. We use a stylized two-period OLG framework, where each generation makes a portfolio allocation decision for retirement, and show that...

We consider a setup in which a large trader has sold a number of American-style derivatives and can have an impact on prices by trading the underlying asset for hedging purposes. The price impacts are assumed to be temporary and decay exponentially with time. Due to the impact of trading on...