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Liquidity Risk

Die Analyse des Verhältnisses zwischen dem Produktions- und dem Finanzsektor sowie deren Einfluss auf die wirtschaftliche Entwicklung bilden den Hauptgegenstand der sogenannten Hypothese finanzieller Instabilität von Hyman P. Minsky. Dieses Thema erweist sich gerade in der heutigen Zeit als hochaktuell. Aus der Perspektive eines "Wall Street-Keynesianers" heraus, entwickelte Minsky eine Theorie der zyklischen Wirtschaftsentwicklung, welche Unsicherheit, Spekulation und Finanzbeziehungen in den Vordergrund stellt und systematisch einbezieht.
[Dissertation zur Erlangung der Würde eines Doktors der Wirtschafts- und Sozialwissenschaften, vorgelegt der Wirtschafts- und sozialwissenschaftlichen Fakultät der Universität Freiburg in der Schweiz]
Schnyder 22202 Downloads 03.09.2007
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Systemic risk is commonly used to describe the possibility of a series of correlated defaults among financial institutions - typically banks - that occur over a short period of time, often caused by a single major event. However, since the collapse of Long Term Capital Management in 1998, it has become clear that hedge funds are also involved in systemic risk exposures. The hedge-fund industry has a symbiotic relationship with the banking sector, and many banks now operate proprietary trading units that are organized much like hedge funds. As a result, the risk exposures of the hedge-fund industry may have a material impact on the banking sector, resulting in new sources of systemic risks. In this article, we attempt to quantify the potential impact of hedge funds on systemic risk by developing a number of new risk measures for hedge funds and applying them to individual and aggregate hedge-fund returns data. These measures include: illiquidity risk exposure, nonlinear factor models for hedge-fund and banking-sector indexes, logistic regression analysis of hedge-fund liquidation probabilities, and aggregate measures of volatility and distress based on regime-switching models. Our preliminary findings suggest that the hedge-fund industry may be heading into a challenging period of lower expected returns, and that systemic risk is currently on the rise.
[Authors: Andrew W. Lo, Nicholas Chan, Mila Getmansky, Shane M. Haas / Source: Federal Reserve Bank of Atlanta Economic Review 2006:Q4, 49-80.]
Lo 11019 Downloads 11.08.2007
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Liquidität ist eine der wichtigsten Unternehmensressourcen, um neue Produkte oder den Eintritt in neue Märkte zu finanzieren. Wird Liquidität knapp, helfen oft nur teure Kredite oder Einsparungen. Einsparpotenziale sind bei vielen Unternehmen jedoch schon ausgeschöpft. Kaum genutzt werden dagegen bislang die Möglichkeiten des Working-Capital-Managements (WCM), d.h. der unternehmensweiten Straffung der Innenfinanzierung.
Angerer 13265 Downloads 19.06.2007
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Basel II und die MaRisk fordern von Banken, dass sie das Liquiditätsrisiko aus ihren Zahlungsströmen quantifizieren. Für das Liquiditätsmanagement von Universal- und Direktbanken stellt die fundierte Analyse hoher, bisher noch nicht beobachteter Liquiditätsrisiken ein besonderes Problem dar, weil Banken jederzeit zahlungsbereit sein müssen und bei ihnen höhere Zahlungsstromrisiken als in der Vergangenheit auftreten können.
Zeranski 6378 Downloads 07.01.2007
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Risk management plays a central role in institutional investors’ allocation of capital to trading. For instance, Jorion (2000, page xxiii) states that value-at-risk (VaR) “is now increasingly used to allocate capital across traders, business units, products, and even to the whole institution.” This paper studies how risk management practices can affect market liquidity and prices. We first show that tighter risk management leads to lower market liquidity, in that it takes longer to find a buyer with unused risk-bearing capacity, and, since liquidity is priced, to lower prices.
Garleanu 8600 Downloads 07.01.2007
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This paper argues that banks have a unique ability to hedge against systematic liquidity shocks. Deposit inflows provide a natural hedge for loan demand shocks that follow declines in market liquidity. Consequently, one dimension of bank “specialness” is that banks can insure firms against systematic declines in market liquidity at lower cost than other financial institutions. We provide supporting empirical evidence from the commercial paper (CP) market. When market liquidity dries up and CP rates rise, banks experience funding inflows, allowing them to meet increased loan demand from borrowers drawing funds from pre-existing commercial paper backup lines without running down their holding of liquid assets. Moreover, the supply of cheap funds is sufficiently large so that pricing on new lines of credit actually falls as market spreads widen.
Gatev 10548 Downloads 07.01.2007
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While there is no equilibrium framework for defining liquidity risk per se, several plausible arguments suggest that liquidity risk is pervasive and thus may be priced. For example, market frictions increase the cost of hedging strategies requiring frequent portfolio rebalancing. Also, liquidity risk is likely to play a role whenever the market declines and investors are prevented from hedging via short positions. Using monthly return data from 1963–2000, and a broad set of test assets, we examine six candidate factor representations of aggregate liquidity risk, and test whether any one of these are priced. The results are interesting. First, with the surprising exception of the recent measure proposed by Pastor and Stambaugh (2001), liquidity factor shocks induce co-movements in individual stocks’ liquidity measure (commonality in liquidity). The commonality is similar to that found in the extant literature (Chordia, Roll, and Subrahmanyam(2000)), which so far has been restricted to a single year of data. Second, again with the exception of the Pastor-Stambaugh measure, the liquidity factors receive statistically significant betas when added to the Fama-French model. Third, maximum-likelihood estimates of the risk premium are significant for the measure based on bid-ask spreads, contemporaneous turnover, as well as the Pastor-Stambaugh measure, which exploits price reversals following volume shocks. Overall, the simple-to-compute, “low-minus-high” turnover factor first proposed by Eckbo and Norli (2000) appears to do as least as well as the other factor measures.
Eckbo 7237 Downloads 07.01.2007
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Abstract: Using a large data set on credit default swaps, we study how default risk interacts with interest-rate risk and liquidity risk to jointly determine the term structure of credit spreads. We classify the reference companies into two broad industry sectors, two broad credit rating classes, and two liquidity groups. We develop a class of dynamic term structure models that include (i) two benchmark interest-rate factors to capture the libor and swap rates term structure, (ii) two credit-risk factors to capture the credit swap spreads of high-liquidity group of each industry and rating class, and (iii) both an additional credit-risk factor and a liquidity-risk factor to capture the difference between the high- and low-liquidity groups. Estimation shows that companies in different industry and credit rating classes have different credit-risk dynamics. Nevertheless, in all cases, credit risks exhibit intricate dynamic interactions with the interest rate factors. Interest-rate factors both affect credit spreads simultaneously, and impact subsequent moves in the credit-risk factors. Within each industry and credit rating class, we also find that the average credit default swap spreads for the high-liquidity group are significantly higher than for the low-liquidity group. Estimation shows that the difference is driven by both credit risk and liquidity differences. The low-liquidity group has a lower default arrival rate and also a much heavier discounting induced by the liquidity risk.
Chen 10847 Downloads 07.01.2007
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Classical theories of financial markets assume an infinitely liquid market and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modelling transaction costs. We extend the classical approach by formulating a new model that takes into account illiquidities. Our approach hypothesizes a stochastic supply curve for a security's price as a function of trade size. This leads to a new definition of a self-financing trading strategy, additional restrictions on hedging strategies, and some interesting mathematical issues.
Cetin 7012 Downloads 07.01.2007
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We develop a structural bond valuation model to simultaneously capture liquidity and credit risk. Our model implies that renegotiation in financial distress is influenced by the illiquidity of the market for distressed debt. As default becomes more likely, the components of bond yield spreads attributable to illiquidity increase. When we consider finite maturity debt, we find decreasing and convex term structures of liquidity spreads. Using bond price data spanning 15 years, we find evidence of a positive correlation between the illiquidity and default components of yield spreads as well as support for downward sloping term structures of liquidity spreads.
Ericsson 7098 Downloads 07.01.2007
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