Journal ArticleDOI
Liquidity and Leverage
Tobias Adrian,Hyun Song Shin +1 more
TLDR
In this article, the authors show that marked-to-market lever-age is strongly procyclical and that changes in aggregate balance sheets for intermediaries forecast changes in risk appetite in financial markets, as measured by the innovations in the VIX index.About:
This article is published in Journal of Financial Intermediation.The article was published on 2010-07-01. It has received 1417 citations till now. The article focuses on the topics: Leverage cycle & Market liquidity.read more
Citations
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Market Liquidity and Funding Liquidity
TL;DR: In this article, the authors provide a model that links a security's market liquidity and traders' funding liquidity, i.e., their availability of funds, to explain the empirically documented features that market liquidity can suddenly dry up (i) is fragile), (ii) has commonality across securities, (iii) is related to volatility, and (iv) experiences “flight to liquidity” events.
Journal ArticleDOI
Deciphering the Liquidity and Credit Crunch 2007-08
TL;DR: The authors summarizes and explains the main events of the liquidity and credit crunch in 2007-08, starting with the trends leading up to the crisis and explaining how four different amplification mechanisms magnified losses in the mortgage market into large dislocations and turmoil in financial markets.
Journal ArticleDOI
Deciphering the Liquidity and Credit Crunch 2007-2008
TL;DR: The financial market turmoil in 2007 and 2008 has led to the most severe financial crisis since the Great Depression and threatens to have large repercussions on the real economy as mentioned in this paper The bursting of the housing bubble forced banks to write down several hundred billion dollars in bad loans caused by mortgage delinquencies at the same time the stock market capitalization of the major banks declined by more than twice as much.
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Credit Spreads and Business Cycle Fluctuations
Simon Gilchrist,Egon Zakrajsek +1 more
TL;DR: In this paper, the authors examined the relationship between credit spreads and economic activity, by constructing a credit spread index based on an extensive data set of prices of outstanding corporate bonds trading in the secondary market and found that the predictive content of credit spreads for economic activity is due primarily to movements in the excess bond premium.
References
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Posted ContentDOI
Agency Costs, Net Worth, and Business Fluctuations.
Mark Gertler,Ben S. Bernanke +1 more
TL;DR: The authors developed a simple neoclassical model of the business cycle in which the condition of borrowers' balance sheets is a source of output dynamics, and the mechanism is that higher borrower net worth reduces the agency costs of financing real capital investments.
Journal ArticleDOI
The Limits of Arbitrage
Andrei Shleifer,Robert W. Vishny +1 more
TL;DR: In this paper, the authors argue that the textbook description of arbitrage does not describe realistic arbitrage trades, and moreover the discrepancies become particularly important when arbitrageurs manage other people's money.
Journal ArticleDOI
Market Liquidity and Funding Liquidity
TL;DR: In this article, the authors provide a model that links a security's market liquidity and traders' funding liquidity, i.e., their availability of funds, to explain the empirically documented features that market liquidity can suddenly dry up (i) is fragile), (ii) has commonality across securities, (iii) is related to volatility, and (iv) experiences “flight to liquidity” events.
Journal ArticleDOI
The Cross-Section of Volatility and Expected Returns
TL;DR: In this paper, the authors examined the pricing of aggregate volatility risk in the cross-section of stock returns and found that stocks with high sensitivities to innovations in aggregate volatility have low average returns.
Journal ArticleDOI
What Do a Million Observations on Banks Say about the Transmission of Monetary Policy
Anil K. Kashyap,Jeremy C. Stein +1 more
TL;DR: The authors found that the impact of monetary policy on lending is stronger for banks with less liquid balance sheets, i.e., banks with lower ratios of securities to assets, and that this pattern is largely attributable to the smaller banks, those in the bottom 95 percent of the size distribution.