Liquidity Risk and the Dynamics of Arbitrage Capital
---- Acknowledgements -----
We thank Edina Berlinger, Nicolae Garleanu, Stavros Panageas, Anna Pavlova, Jean-Charles Rochet, Hongjun Yan, as well as seminar participants at Copenhagen, LBS, LSE, Zurich, and participants at the AEA, Arne Ryde, ESEM, ESSFM Gerzensee, and EWFC conferences, for helpful comments. Financial support from the Paul Woolley Centre at the LSE is gratefully acknowledged. Kondor thanks the European Research Council (Starting Grant \#336585) for financial support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.