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Asset Pricing with Liquidity Risk
This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidityadjusted capital asset pricing model, a security s required return depends on its expected liquidity asExpand
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A Theory of Systemic Risk and Design of Prudential Bank Regulation
Systemic risk is modeled as the endogenously chosen correlation of returns on assets held by banks. The limited liability of banks and the presence of a negative externality of one bank's failure onExpand
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A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk
We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy by ameliorating the under-investment problem of the financial sector. However,Expand
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Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios
We study empirically the effect of focus (specialization) vs. diversification on the return and the risk of banks using data from 105 Italian banks over the period 1993-1999. Specifically, we analyzeExpand
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The "Greatest" Carry Trade Ever? Understanding Eurozone Bank Risks
We show that eurozone bank risks during 2007–2013 can be understood as carry trade behavior. Bank equity returns load positively on peripheral (Greece, Italy, Ireland, Portugal, Spain, or GIIPS) bondExpand
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Is the International Convergence of Capital Adequacy Regulation Desirable?
The merit of having international convergence of bank capital requirements in the presence of divergent closure policies of different central banks is examined. While the privately optimal level ofExpand
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Corporate Governance and Value Creation: Evidence from Private Equity
We examine deal-level data on private equity transactions in the UK initiated during the period 1996 to 2004 by mature private equity houses. We un-lever the deal-level equity return and adjust forExpand
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Whatever it Takes: The Real Effects of Unconventional Monetary Policy
Launched in Summer 2012, the European Central Bank (ECB)'s Outright Monetary Transactions (OMT) program indirectly recapitalized European banks through its positive impact on periphery sovereignExpand
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Leverage, Moral Hazard and Liquidity
We build a model of the financial sector to explain why adverse asset shocks in good economic times lead to a sudden drying up of liquidity. Financial firms raise short-term debt in order to financeExpand
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Precautionary Hoarding of Liquidity and Inter-Bank Markets: Evidence from the Sub-Prime Crisis
We study the liquidity demand of large settlement banks in the UK and its effect on the Sterling Money Markets before and during the sub-prime crisis of 2007-08. Liquidity holdings of largeExpand
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