This paper analyzes a model in which long‐term risky assets are illiquid due to adverse
selection. The degree of adverse selection and hence the liquidity of these assets is …

This paper solves explicitly a simple equilibrium model with liquidity risk. In our liquidity-
adjusted capital asset pricing model, a security's required return depends on its expected …

Not only does risk management affect liquidity; liquidity can also affect risk-management
practices. For instance, the Bank for International Settlements (2001, 15) states,“For the …

We analyze how asymmetric information and imperfect competition affect liquidity and asset
prices. Our model has three periods: Agents are identical in the first, become heterogeneous …

We study an equilibrium in which agents face surprise liquidity shocks and invest in liquid
and illiquid riskless assets. The random holding horizon from liquidity shocks makes the …

Liquidity is an important factor in asset pricing. For both stocks and bonds, the lower the
liquidity of an asset (that is, the higher the cost of trading it), the higher the return it is …

An asset is liquid if it can be traded at the prevailing market price quickly and at low cost. We
show that in addition to risk, liquidity affects asset prices and returns. Theories of asset …

ABSTRACT I analyze a model in which holding cash imposes a negative externality: it
worsens future adverse selection in markets for long‐term assets, which impairs their role for …

Traditional models of portfolio choice assume that investors can continuously trade unlimited
amounts of securities. In reality, investors face liquidity constraints. I analyze a model where …

We develop a continuous‐time model of liquidity provision in which hedgers can trade
multiple risky assets with arbitrageurs. Arbitrageurs have constant relative risk‐aversion …