Bond Liquidity Premia
Theory predicts that funding conditions faced by financial intermediaries are an important limit to arbitrage. We identify and measure the value of funding liquidity from the cross-section of Treasury securities. To validate our interpretation, we establish linkages with funding conditions in the repo market, the shadow banking sector, and the overall economy. Looking at asset pricing implications, we find that increases in funding liquidity predict lower risk premia for all Treasury securities but higher risk premia on LIBOR loans, swap contracts, and corporate bonds. The impact of funding conditions on interest rates is large and pervasive throughout crises and normal times. The Author 2011. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: email@example.com., Oxford University Press.
Volume (Year): 25 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.|
Web page: https://academic.oup.com/rfs
More information through EDIRC
|Order Information:||Web: http://www4.oup.co.uk/revfin/subinfo/|
When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:25:y:2012:i:4:p:1207-1254. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.