Liquidity risk and the covered bond market in times of crisis: empirical evidence from Germany

Liquidity risk is the risk that an asset cannot always be sold without causing a fall in its price because of a lack of demand for this asset. Many empirical studies examining liquidity premia have focused on government bonds. In this paper, we specifically investigate the yield differentials between liquid and illiquid German covered bonds by considering the yields of traditional Pfandbrief bonds and Jumbo Pfandbrief bonds with different...