http://www.aleablog.com/paper-liquidity-risk-premia-in-unsecured-interbank-money-markets/ Alea Jacta Est Wed, 03 Mar 2010 18:43:34 +0000 http://wordpress.org/?v=2.9.2 hourly 1 http://www.aleablog.com/paper-liquidity-risk-premia-in-unsecured-interbank-money-markets/#comment-3221 Random Links LIV « Random Musings of a Deranged Mind Tue, 09 Jun 2009 02:16:53 +0000 http://www.aleablog.com/?p=3490#comment-3221 [...] Liquidity Risk:  Granted, liquidity was an issue in the crisis.  But even this study admits that there was also credit risk at work – illiquidity wasn’t arising from pure panic, but rather from severe risk-aversion arising from justified concerns re. institutions’ solvency.  The solution, therefore, wasn’t guarantees or LOLR operations (except initially); but rather to kill off the solvency concerns by determining who was solvent & who wasn’t, and killing off the latter.  I.e., the “Swedish solution”. [...] [...] Liquidity Risk:  Granted, liquidity was an issue in the crisis.  But even this study admits that there was also credit risk at work – illiquidity wasn’t arising from pure panic, but rather from severe risk-aversion arising from justified concerns re. institutions’ solvency.  The solution, therefore, wasn’t guarantees or LOLR operations (except initially); but rather to kill off the solvency concerns by determining who was solvent & who wasn’t, and killing off the latter.  I.e., the “Swedish solution”. [...]

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