Finance
Liquidity Fragility in Small-Cap Credit Markets
Abstract
The paper analyzes how market depth deteriorates in small-cap credit when dealer balance-sheet capacity tightens. It shows that seemingly modest changes in quoting behavior can produce outsized repricing once liquidity providers begin managing inventory more defensively. The results highlight how fragility emerges from interaction effects rather than from any single large shock, with implications for risk management and execution strategy.
Publication Metadata
Keywords
liquiditycredit marketsmarket microstructureexecution risk
Citation
Michael Rowan; Aditi Sen; Victor Halberg (2025). Liquidity Fragility in Small-Cap Credit Markets. Journal of Market Microstructure. 10.48211/insight.fin.2025.3091
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