Basel 3 and the Liquidity of Corporate and Government Bonds in Europe

14 Pages Posted: 7 Jul 2013

See all articles by Giovanni Petrella

Giovanni Petrella

Università Cattolica del Sacro Cuore

Andrea Resti

Bocconi University - Department of Finance

Date Written: April 1, 2013

Abstract

We perform an empirical analysis to identify the main factors driving the liquidity of corporate and government bonds both in ordinary times and in times of market turmoil. Our findings highlight the importance of credit ratings, amount issued and bond duration as factors affecting bond liquidity. We conclude that the lack of concentration limits for domestic government bonds, coupled with the absence of a minimum rating threshold, may strongly reduce the effectiveness of the liquidity coverage ratio.

Note: Downloadable document is in Italian.

Keywords: Liquidity risk, Liquidity coverage ratio, high quality risky asset, Basel 3

JEL Classification: G10, G28

Suggested Citation

Petrella, Giovanni and Resti, Andrea, Basel 3 and the Liquidity of Corporate and Government Bonds in Europe (April 1, 2013). Bancaria No. 03-2013. Available at SSRN: https://ssrn.com/abstract=2290630

Giovanni Petrella (Contact Author)

Università Cattolica del Sacro Cuore ( email )

Largo Gemelli 1
Milano, 20123
Italy
+39 02 72343007 (Phone)

Andrea Resti

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

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