Arbeitspapier

Banks and Market Liquidity

I study a model of market-liquidity provision by levered intermediaries that, besides operating trading desks, run deposit-taking franchises. Levered intermediaries’ heightened incentive to absorb risk helps to counteract liquidity-provision frictions that, in an unlevered economy, would lead to price distortions and suppressed levels of asset origination ex ante. However, liquidity provision may also overshoot, leading to unhealthy price bubbles and causing asset origination to become excessive. Capital requirements are no panacea: They can spur risk taking and make bubbles bubblier. Ring fencing of trading activities can be, but is not necessarily, undesirable.

Sprache
Englisch

Erschienen in
Series: Tinbergen Institute Discussion Paper ; No. 15-020/IV

Klassifikation
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Information and Market Efficiency; Event Studies; Insider Trading
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
Thema
Market Liquidity
Capital Requirements
Volcker Rule
Ring Fencing

Ereignis
Geistige Schöpfung
(wer)
Arping, Stefan
Ereignis
Veröffentlichung
(wer)
Tinbergen Institute
(wo)
Amsterdam and Rotterdam
(wann)
2015

Handle
Letzte Aktualisierung
20.09.2024, 08:21 MESZ

Datenpartner

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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Arping, Stefan
  • Tinbergen Institute

Entstanden

  • 2015

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