Liquidity Risk and Funding Cost
نویسندگان
چکیده
Abstract We propose and test a new channel that links liquidity risk interest rates in short-term funding markets. Unlike existing theories focus on premiums demanded by lenders, the postulates borrowers are more exposed to urgent needs willing pay markup for immediate funding. quantify using unique trade-by-trade data uncover systematic differences across individual banks’ cost driven risk. These persistent over decade, suggesting is relevant general not only arises during crisis times.
منابع مشابه
Systemic Funding Liquidity Risk and Bank Failures
We examine the roles of idiosyncratic and systemic funding liquidity risks in bank failures. We estimate a discrete-time hazard model of bank failure using data of U.S. commercial banks between 1985 and 2004, and examine its out-of-sample forecasting performance between 2005 and 2011. The out-of-sample performance comparison shows this model outperforms typical bank failure prediction models. W...
متن کاملFunding Liquidity and Market Liquidity
Recent empirical studies have shown an increasing co-movement between fund and market liquidity, which is driven by common factors such as monetary shocks. Modeling this comovement becomes desirable to evaluate policies relating to liquidity and financial instability. This paper establishes a monetary model with capital to explain the dynamic interactions between funding and market liquidity in...
متن کاملMarket Liquidity and Funding Liquidity
We provide a model that links a security’s market liquidity — i.e., the ease of trading it — and traders’ funding liquidity — i.e., their availability of funds. Traders provide market liquidity and their ability to do so depends on their funding, that is, their capital and the margins charged by their financiers. In times of crisis, reductions in market liquidity and funding liquidity are mutua...
متن کاملFunding Liquidity Risk and the Dynamics of Hedge Fund Lockups
We exploit the expiring nature of hedge fund lockups to create a dynamic, fund-level proxy of funding liquidity risk. In contrast to the prior literature, our measure allows us to identify how within-fund changes in funding liquidity risk are associated with performance and risk taking. Lockup funds with lower funding liquidity risk take more tail risk and have better risk-adjusted performance,...
متن کاملIntroduction to Liquidity and Funding Markets
In today’s diverse and globally interconnected financial system, a wide range of intermediaries are involved in the process of channelling funds from savings to investments and providing risk sharing, insurance and transactions services to households and firms. For smooth flow of funds it is critical that this complex system operates effectively. This in turn relies on stable and efficient mark...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Review of Finance
سال: 2022
ISSN: ['1875-824X', '1572-3097']
DOI: https://doi.org/10.1093/rof/rfac020