This paper shows that the quantitative predictions of an equilibrium asset-pricing model with financial frictions are consistent with key features of the Sudden Stop phenomenon. Foreign traders incur costs in trading assets with domestic agents, and a collateral constraint limits external debt to a fraction of the market value of domestic equity holdings. When this constraint does not bind, sta...

This paper is about how to estimate the integrated covariance 〈X,Y 〉T of two assets over a fixed time horizon [0, T ], when the observations of X and Y are “contaminated” and when such noisy observations are at discrete, but not synchronized, times. We show that the usual previous-tick covariance estimator is biased, and the size of the bias is more pronounced for less liquid assets. This is an...

Some assets are traded in liquid markets, at transparent prices, with the help of many thriving intermediaries: houses and apartments, stocks and other financial products, books, DVDs, electronics and all sorts of collectibles. Intellectual property (IP) in general and patents in particular (the focus of this paper) are not among those assets (Gans and Stern (2010)). The patent market consists ...

Entrepreneurs need cash to finance their investments. Since cash is costly to hold, entrepreneurs underinvest. If entrepreneurs are able to access secondary financial markets, then they can sell some of their less liquid assets for cash and invest at a higher level. When the secondary financial markets are over-the-counter (OTC), the amount of liquidity (cash) that is in the market affects asse...

Turmoil in financial markets is often accompanied by a significant decrease in market liquidity. Here, we investigate how such key risk measures as likelihood of insolvency, value at risk, and expected tail loss respond to bid– ask spreads that are likely to widen just when positions must be liquidated to maintain capital ratios. Our results show that this sort of illiquidity causes significant...

Using data from Italian banks over the period 2011-2017, we study how negative interest rate policy and prudential regulation impact on bank business models. We report four key findings. First, shifted into retail- market-oriented Second, high- low-deposit reduced loans increased security/liquid assets; only expanded lending. Third, income compression induced by rates has been substantial for b...

The current study aims to examine the determinants of capital adequacy ratio (CAR) in context Jordanian banks through a literature review and analysis empirical evidence. aggregate data were obtained from Globaleconomy.com, Financial Soundness Indicators, Central Bank Jordan, World Data covering period 2003 2021. analyzed using autoregressive distributed lag (ARDL), utilizing Econometric Views ...

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