In this essay we investigate the actual level of liquidity for European government and corporate bonds in both normal and stressed market conditions. Specifically, we want to assess which assets’ characteristics can increase liquidity during crisis times and which characteristics can cause extreme drops in liquidity.Our policy-oriented objective is thus twofold: we intend to assess whether the new Basel 3 criteria for defining high-quality liquid assets are appropriate and we wish to identify alternative asset classes that regulators might consider for the inclusion in the Hqlas definition.
The liquidity of European corporate and government bonds: drivers and sensitivity to different market conditions
RESTI, ANDREA CESARE
2013
Abstract
In this essay we investigate the actual level of liquidity for European government and corporate bonds in both normal and stressed market conditions. Specifically, we want to assess which assets’ characteristics can increase liquidity during crisis times and which characteristics can cause extreme drops in liquidity.Our policy-oriented objective is thus twofold: we intend to assess whether the new Basel 3 criteria for defining high-quality liquid assets are appropriate and we wish to identify alternative asset classes that regulators might consider for the inclusion in the Hqlas definition.
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