A dealer’s funding liquidity risk and its money market trades in the 2007/08 crisis
研究了一家大型交易商在欧元无担保货币市场的交易，发现其融资流动性风险在雷曼兄弟倒闭后显著推高了隔夜流动性报价，加剧了市场流动性收缩。
In this study, we examine the trading book of a major dealer in the European unsecured money market, focusing on the impact of a dealer’s own funding liquidity risk on the pricing of his interbank trades pre- and post- the 2007/08 financial crisis. Our analysis reveals two key insights: First, utilizing a panel model, we observe that heightened funding liquidity risks for the dealer generally affect his quoted prices for interbank liquidity. Second, while in tranquil periods this effect is statistically significant but economically less pronounced, the collapse of Lehman Brothers led to a strong liquidity pricing effect: a one standard deviation increase in the funding liquidity risk of the dealer translated to a 11 basis points higher mid-price for overnight liquidity. We thus find evidence that funding liquidity risks exacerbated the overall contraction of money market liquidity during this period.