Equilibrium and welfare in markets with financially constrained arbitrageurs

By Denis Gromb, Dimitri Vayanos. 2002

1,130 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/81dae0f9088f71b56ba34240379f24888aecd6eb

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Citations in the corpus

Institutional Trading and Stock Resiliency: Evidence from the 2007-2009 Financial Crisis (2013, neutral): “The key idea is summarized by Gromb and Vayanos (2012) who note that liquidity providers should”
Stock Market Declines and Liquidity (2010, positive): “Gromb and Vayanos (2002) emphasize that the reduction in supply of liquidity due to capital constraints has important welfare and regulatory implications.”
The curse of non-investment grade countries (2002, neutral): “Two notable exceptions are Kaminsky and Reinhart (1998) and Gromb and Vayanos (2001) .”
Leverage causes fat tails and clustered volatility (2009, background): “We are not the first to recognize the downward spiral of margin calls (Geanakoplos 1997, 2003, 2010, Shleifer and Vishny 1997, Gromb and Vayanos 2002, Fostel and Geanakoplos 2008, Brunnermeier and Pedersen 2009).”
Convective Risk Flows in Commodity Futures Markets (2015, neutral): “This may particularly affect financial traders as they face both more stringent risk controls as well as potential funding constraints (e.g., Gromb and Vayanos, 2002; Brunnermeier and Pedersen, 2009).”
Solving the present crisis and managing the leverage cycle (2010, neutral): “This line of research has been pursued by Gromb and Vayanos (2002), Fostel-Geanakoplos (2008), Brunnermeier and Pedersen (2009), and Adrian and Shin (2009), among others.”
High-Frequency Trading and Extreme Price Movements (2018, positive): “Traders described by Grossman and Miller (1988) supply liquidity during trade imbalances and benefit from price reversals that follow.”
Understanding FX Liquidity (2015, background): “For instance, we investigate whether FX liquidity deteriorates with funding constraints and higher volatility, as postulated by recent theoretical models (e.g., Brunnermeier and Pedersen 2009; Vayanos and Gromb 2002), or demand shocks inducing portfolio reshuffling (e.”
Understanding Commonality in Liquidity Around the World (2011, background): “In the models of Kyle and Xiong (2001), Gromb and Vayanos (2002), Morris and Shin (2004), and Brunnermeier and Pedersen (2009), this asymmetric reaction arises from the coincidence of binding funding constraints and the loss in collateral values that force financial intermediaries to reduce the…”
Noise as Information for Illiquidity: Noise as Information for Illiquidity (2013, neutral): “…our study explores the empirical implications of the theoretical “limits of arbitrage”, which emphasizes the link between shortage of capital, market liquidity, and price deviations (see, for example, Merton (1987), Shleifer and Vishny (1997), Kyle and Xiong (2001), and Gromb and Vayanos (2002)).”
Limits to arbitrage during the crisis: funding liquidity constraints and covered interest parity (2011, neutral): “…in Acharya, Shin, and Yorulmazer (2009), Brunnermeier and Pedersen (2009), Kondor (2009), He and Krishnamurthy (2008b,a), Liu and Longstaff (2004), Gromb and Vayanos (2002), Rinne and Suominen (2009) and Shleifer and Vishny (1997) 20 raising equity was nearly impossible, available capital became…”
Psychology and the Financial Crisis of 2007-2008 (2011, background): “These loss spirals and margin spirals, described in detail by Shleifer and Vishny (1997), Gromb and Vayanos (2002), and Brunnermeier (2009), among others, were probably important in transforming relatively small subprime losses into much larger price declines on many kinds of risky assets.”