| Item Type |
Monograph
(Working Paper)
|
| Abstract |
We propose and test a new channel that links funding liquidity risk and interest rates in short-term funding markets. Unlike existing theories that focus on premiums demanded by lenders, the funding liquidity risk channel postulates that borrowers exposed to liquidity shocks are willing to pay a markup for immediate funding. We test and quantify the channel using unique trade-by-trade data and uncover systematic differences across individual banks’ funding cost driven by idiosyncratic liquidity risk. These differences are persistent over a decade, suggesting that the funding liquidity risk channel is relevant in general and not only arises during crisis times. |
| Authors |
Bechtel, Alexander; Ranaldo, Angelo & Wrampelmeyer, Jan |
| Language |
English |
| Keywords |
Funding liquidity risk, short-term interest rates, risk premiums, funding costs, interbank market |
| Subjects |
finance |
| HSG Classification |
contribution to scientific community |
| HSG Profile Area |
SOF - System-wide Risk in the Financial System |
| Date |
14 May 2019 |
| Series Name |
School of Finance Workingpaper Series |
| Volume |
2019 |
| Number |
03 |
| Number of Pages |
70 |
| Official URL |
https://papers.ssrn.com/sol3/papers.cfm?abstract_i... |
| Depositing User |
Christina Ihasz
|
| Date Deposited |
23 May 2019 08:18 |
| Last Modified |
22 Mar 2023 01:25 |
| URI: |
https://www.alexandria.unisg.ch/publications/257072 |
Liquidity Risk and Funding Cost
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