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Cited by 4,835

The DOI matches its Crossref record; 3 of the 3 references it cites were found in a registry or an index.

Market Liquidity and Funding Liquidity

Brunnermeier, Markus K., Pedersen, Lasse Heje·2009·Review of Financial Studies
DOI 10.1093/rfs/hhn098
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Abstract

We provide a model that links an asset's market liquidity (i.e., the ease with which it is traded) and traders' funding liquidity (i.e., the ease with which they can obtain funding). Traders provide market liquidity, and their ability to do so depends on their availability of funding. Conversely, traders' funding, i.e., their capital and margin requirements, depends on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and market liquidity and funding liquidity are mutually reinforcing, leading to liquidity spirals. The model explains the empirically documented features that market liquidity (i) can suddenly dry up, (ii) has commonality across securities, (iii) is related to volatility, (iv) is subject to “flight to quality,” and (v) co-moves with the market. The model provides new testable predictions, including that speculators' capital is a driver of market liquidity and risk premiums.

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Metadata

Authors
Brunnermeier, M. K., & Pedersen, L. H.
Venue
Review of Financial Studies
Publisher
Oxford University Press (OUP)
Published
2008-11-26
Volume
22
Issue
6
Pages
2201-2238
ISSN
  • 0893-9454 (ISSN-L)
  • 1465-7368
DOI
10.1093/rfs/hhn098
OpenAlex
W3121630491
Cited by
4,835
References
3
FWCI
354.60
Type
journal article
Language
en
Open access
closed

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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).

Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.