In sharp contrast to most previous crisis episodes, the Treasury market experienced severe
stress and illiquidity during the COVID-19 crisis, raising concerns that the safe-haven status …

We document a regime change in the Treasury market post-Global Financial Crisis (GFC):
dealers switched from net short to net long Treasury bonds. We construct “net-long” and “net …

The covered interest rate parity (CIP) condition is a fundamental arbitrage relationship in
international finance. In this chapter, we review its breakdown during the Global Financial …

We argue that central bank large-scale asset purchases—commonly known as quantitative
easing (QE)—can reduce priced frictions to trading through a liquidity channel that operates …

We document the rise and fall of an arbitrage trade among hedge funds known as the
Treasury cash-futures basis trade. This trade exploited a fundamental disconnect between …

We use arbitrage activity in equity, fixed income, and foreign exchange markets to
characterize the frictions and constraints facing intermediaries. The average pairwise …

Violations of no-arbitrage conditions measure the shadow cost of intermediary constraints.
Intermediary asset pricing and intertemporal hedging together imply that the risk of these …

We show a significant loss in US Treasury market functionality when intensive use of dealer
balance sheets is needed to intermediate bond markets, as in March 2020. Although yield …

Capital surcharges on global systemically important banks (GSIBs) decrease lending to
firms but do not have any real effects. Banks subject to higher surcharges reduce loan …

We infer risk-free rates from index option prices to estimate safe asset convenience yields in
10 G11 currencies. Countries' convenience yields increase linearly with the level of their …