Liquidity Risk and the Dynamics of Arbitrage Capital
NBER Working Paper No. 19931
---- Acknowledgements ----
We thank Edina Berlinger, Bruno Biais, Itamar Dreschler, Nicolae Garleanu, Pete Kyle, Stavros Panageas, Anna Pavlova, Jean-Charles Rochet, Hongjun Yan, an anonymous associate editor and two anonymous referees; seminar participants at Atlanta Fed, Bank of Canada, Cass, Columbia, Copenhagen, Duke, HKU, Imperial, LBS, LSE, Minneapolis Fed, Montreal, NUS, Ohio State, Tinbergen, UIUC, UNC, Wash U, Wharton, and Zurich; and participants at the AEA, AFA, Arne Ryde, Cambridge INET, CRETE, EIEF Market Microstructure, ESEM, ESSFM Gerzensee, EWFC, NBER Asset Pricing, QMUL, and SED conferences, for helpful comments. We are also grateful to Mihail Zervos for valuable guidance and encouragement with the proofs on differential equations. Kondor acknowledges financial support from the European Research Council (Starting Grant #336585). Both authors acknowledge financial support from the Paul Woolley Centre at the LSE. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.