Dinger, Valeriya—Do foreign-owned banks affect banking system liquidity risk? Existing empirical research shows that foreign-owned banks play a stabilizing role in emerging economies’ banking systems. Anecdotal evidence suggests that this stabilizing role can be attributed to transnational banks’ access to more diversified sources of liquidity. There exists, however, no empirical evidence so fa...

This paper examines the relationship between financial risks and profitability of the conventional and Islamic banks in Malaysia for the period between 1996 and 2005. The measures of profitability that have been used in the study are the return on equity (ROE) and return on assets (ROA) while the financial risks are credit risk, interest rate risk and liquidity risks. This study employs panel d...

 Liquidity Risk in Sequential Trading Networks, with Maciej Kotowski, Harvard University, and Matthew Leister, Monash University. Version: October 9, 2017. Forthcoming, Games and Economic Behavior. This paper studies a model of intermediated exchange with liquidityconstrained traders. Intermediaries are embedded in a trading network and their financial capacities are private information. We ch...

Long-term bonds are exposed to higher interest-rate risk, or duration, than short-term bonds. Conventional interest-rate risk management prescribes that a firm structure the maturity of its liabilities in order to hedge the duration of its long-term assets (?). By doing so, the firm’s assets and liabilities move in lockstep, and its net equity is shielded from (at least small) movements in inte...

We argue that a firm’s aggregate risk is a key determinant of whether it manages its future liquidity needs through cash reserves or bank lines of credit. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get credit lines from banks, and opt for cash reserves in spite of higher opportunity costs and liquidity pre...

This study empirically examines the effect of foreign exchange (FX) market liquidity risk and volatility on the excess returns of currency carry trades. In contrast to the existent literature, we construct an alternative proxy of liquidity risk violations of no arbitrage bounds in the forward and currency swap markets. We also use volatility smile data to capture FX-market specific volatility. ...

This paper presents a dynamic portfolio choice model to analyze the liquidity premium necessary to compensate an investor for the adverse price impact of trading. By calibrating the model to empirically reasonable parameter values, we generate a plausible liquidity premium. Specifically, the premium is an increasing, concave function of price impact. It increases with the investor’s initial wea...

Latency (i.e. time delay) in electronic markets affects the efficacy of liquidity taking strategies. During liquidity, takers process information and send marketable limit orders (MLOs) to exchange, order book (LOB) might undergo updates, so there is no guarantee that MLOs are filled. We develop a latency-optimal trading strategy improves marksmanship takers. The interaction between LOB modeled...