Finance · Liquidity
how do intraday liquidity requirements influence corporate treasury investment choices?
Corporate treasuries balance returns against the need to ensure payments clear on the same day. Regulatory guidance from the Basel Committee on Banking Supervision at the Bank for International Settlements
do contingent convertible bonds improve bank liquidity during sovereign stress?
Contingent convertible bonds, often called CoCos, are debt instruments that convert into equity or suffer principal write-downs when a bank’s capital falls below a predefined trigger. Their design aims to
who provides last-resort liquidity to nonbank wholesale markets?
Central banks provide last-resort liquidity to nonbank wholesale markets, stepping in when market plumbing breaks and private short-term funding evaporates. Ben S. Bernanke, Brookings Institution, has long explained the central
when do corporate liquidity covenants trigger cross-default cascades?
Corporate liquidity covenants can trigger cross-default cascades when shortfalls in cash or breaches of contractual liquidity ratios prompt one creditor to accelerate a facility, and cross-default clauses in other contracts
which market participants absorb liquidity during sustained low-volatility periods?
Sustained low volatility changes who steps in as counterparties. In market-microstructure terms, liquidity provision and liquidity absorption shift among dealers, algorithmic traders, and large institutional investors. Albert S. Kyle of
how do collateral haircut changes affect interbank liquidity flows?
Collateral valuation rules in secured funding markets determine the fraction of asset value that can be borrowed against. Changes to haircuts—the percentage discount applied to collateral—directly alter how much liquidity
how do staggered maturities influence corporate liquidity under rollover risk?
Corporations face the possibility that short-term creditors will not renew funding when economic or market conditions worsen. Staggered maturities change the timing of refinancing needs so that only a fraction
what governance arrangements improve corporate liquidity decision-making during stress?
Strong governance narrows the range of poor choices when firms face liquidity stress by clarifying authority, improving information flow, and aligning incentives. Evidence from corporate governance research underscores that boards
how does inventory management by dealers affect market liquidity resilience?
Dealer inventory management shapes the ability of markets to absorb shocks and recover from stress because dealers are the primary sources of immediate market liquidity. Empirical and theoretical work shows
why do market makers withdraw liquidity during sudden volatility spikes?
Market makers withdraw liquidity during sudden volatility spikes mainly because the costs and risks of standing ready to trade rise sharply. Academic models and empirical studies identify three core drivers: