Viral V. Acharya is from New York University; S. Viswanathan is from Duke University. This paper was earlier circulated under the title “Moral Hazard, Collateral, and Liquidity.” The authors are grateful to Bruno Biais, Patrick Bolton, Peter DeMarzo, Doug Diamond (acting editor), Darrell Duffie, Daniela Fabbri, Douglas Gale, Itay Goldstein, Arvind Krishnamurthy, Praveen Kumar, Nissan Langberg, Xuewen Lin, Martin Oehmke, Guillaume Plantin, Adriano Rampini, Jean-Charles Rochet, Jose Scheinkman, Raghu Sundaram, Alexei Tchistyi, Dimitri Vayanos, Jiang Wang, and an anonymous referee for useful discussions; to seminar participants at Bank of England, Brunel University, CEPR Symposium (2009) at Gerzensee, Chicago-GSB Conference on Liquidity Concepts, Duke, European Winter Finance Conference (2008) in Klosters, Federal Reserve Bank of New York conference on Liquidity Tools, University of Houston, Indian School of Business, London Business School, London School of Economics, University of Michigan, University of Minnesota, MIT (Sloan), NBER Research Meetings in Market Microstructure, New York Fed-NYU Conference on Financial Intermediation, Northwestern University, Oxford University, Princeton University, Southern Methodist University, Universite Toulouse, the Wharton School of the University of Pennsylvania and University College London for comments; and to Ramin Baghai, Wailin Yip, Or Shachar, and Yili Zhang for their research assistance. Brandon Lindley's help with numerical solutions was particularly helpful. Part of this paper was completed while Viral Acharya was at London Business School and while visiting Stanford-GSB. The usual disclaimer applies.
Leverage, Moral Hazard, and Liquidity
Version of Record online: 6 JAN 2011
© 2011 the American Finance Association
The Journal of Finance
Volume 66, Issue 1, pages 99–138, February 2011
How to Cite
ACHARYA, V. V. and VISWANATHAN, S. (2011), Leverage, Moral Hazard, and Liquidity. The Journal of Finance, 66: 99–138. doi: 10.1111/j.1540-6261.2010.01627.x
- Issue online: 6 JAN 2011
- Version of Record online: 6 JAN 2011
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