Abstract

http://ssrn.com/abstract=958305
 
 

References (27)



 
 

Citations (1)



 


 



Liquidity Risk and Limited Arbitrage: Are Banks Helping Hedge Funds Get Rich?


Evan Gatev


Simon Fraser University

January 2007


Abstract:     
During systematic liquidity shocks, hedge funds are able to borrow from banks and thus are not limited by capital constraints. Government-protected bank deposits receive inflows during systematic liquidity shocks. These inflows provide low cost funding and help estimate the magnitude of a shock, reducing the information asymmetry that constrains hedge funds. The unique combination of low funding cost and sophisticated information gives banks an advantage in lending to hedge funds. While banks do not participate in the upside risk that they finance, they compete away their effective government subsidy to the benefit of their hedge fund clients.

Number of Pages in PDF File: 45

Keywords: banks, hedge funds, limited arbitrage, liquidity risk

JEL Classification: G21

working papers series


Download This Paper

Date posted: January 21, 2007  

Suggested Citation

Gatev, Evan, Liquidity Risk and Limited Arbitrage: Are Banks Helping Hedge Funds Get Rich? (January 2007). Available at SSRN: http://ssrn.com/abstract=958305 or http://dx.doi.org/10.2139/ssrn.958305

Contact Information

Evan Gatev (Contact Author)
Simon Fraser University ( email )
Burnaby, British Columbia V5A 1S6
Canada
Feedback to SSRN


Paper statistics
Abstract Views: 1,479
Downloads: 404
Download Rank: 38,168
References:  27
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.297 seconds