Fear of Fire Sales and the Credit Freeze

By Douglas W. Diamond, Raghuram G. Rajan. 2009

182 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/3e3cab4b5d1cd7c2e823c337af3488326c191bbc

Citations in the corpus

Balance Sheet Adjustments in the 2008 Crisis (2010, unknown): “21 Allen and Gale (1994), Diamond and Rajan (2009), and Holmstrom and Tirole (1998) study a dynamic version of the leverage-constraints model.”
Adverse Selection and Liquidity Distortion (2011, unknown): “…price and how fast they can nd a counter- 1The notion of a buyers strike in connection to the recent crisis has been discussed in Tirole (2010) and Diamond and Rajan (2009). party in decentralized markets.2 The setup is therefore relevant for any asset traded in decentralized markets and…”
Dividends and Bank Capital in the Financial Crisis of 2007-2009 (2011, unknown): “…left by the collapse of the securitization market as they would rather wait for the fortunes of their beleaguered assets and thinly capitalized balance sheets to resurrect than extinguish that option for lower risk loans (see also Diamond and Rajan (2009) for a related theoretical point).”
Financial Connections and Systemic Risk (2010, unknown): “Concerning liquidity risk more generally, Diamond and Rajan (2009) find that liquidity dry-ups can arise from the fear of fire sales; while Bolton, Santos and Scheinkman (2009) look at maturity mismatch and its impact on liquidity demand when there is asymmetric information.”
Monetary Policy and Bank Risk-Taking: Evidence from the Corporate Loan Market (2017, unknown): “Until recently, the macro literature has typically focused on the link between the stance 1See Borio and Zhu (2008), Brunnermeier (2009), and Diamond and Rajan (2009).”
Illiquidity and All Its Friends (2011, unknown): “But what if there are actually no gains from trade between the two sides of the transaction? Diamond and Rajan’s "asset substitution theory" (2009), applying the theory of debt overhang and risk shifting, offers an alternative perspective for the recent freeze of some markets.”
A model of a systemic bank run (2009, unknown): “Diamond and Rajan (2009) have argued that banks have become reluctant to sell their securities at present, if they foresee the possibility of insolvency due to firesale prices in the future: the option of waiting allows banks to redistribute losses of depositors from the insolvency state in the…”
Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk (2009, unknown): “max Ll; ; L l; ; R l; p [R (1 l; ) + l; (1 + l; l ) + p̂(1 + r)Ll; (1 l)d2]: (21)”
Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japan (2010, unknown): “The CCPC, described best by 10 See Peek (2008) for a survey of the evidence on the behavior of the banks in the 1980s and 1990s.”
A Macroprudential Approach to Financial Regulation (2011, unknown): “Moreover, the fire-sale and credit-crunch effects are intimately connected (Diamond and Rajan, 2009; Shleifer and Vishny, 2010; Stein, 2010a).”
E¢ cient Recapitalization (2010, unknown): “In Diamond and Rajan (2009) as in our model, debt overhang makes banks unwilling to sell their toxic assets.”