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Why do markets freeze?

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  • Yaron Leitner

Abstract

In normal times, investors buy and sell financial assets because there are gains from trade. However, markets do not always function properly ? they sometimes ?freeze.? An example is the collapse of trading in mortgage-backed securities during the recent financial crisis. Why does trade break down despite the potential gains from trade? Can the government intervene to restore the normal functioning of markets? In ?Why Do Markets Freeze?,? Yaron Leitner explains what a market freeze is and some of the theories as to why these freezes occur.

Suggested Citation

  • Yaron Leitner, 2011. "Why do markets freeze?," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 12-19.
    • Handle: RePEc:fip:fedpbr:y:2011:i:q2:p:12-19
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    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/economy/articles/business-review/2011/q2/brq211_why-do-markets-freeze.pdf
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    References listed on IDEAS

    as
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    Cited by:

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    3. Luu, Duc Thi & Napoletano, Mauro & Barucca, Paolo & Battiston, Stefano, 2021. "Collateral Unchained: Rehypothecation networks, concentration and systemic effects," Journal of Financial Stability, Elsevier, vol. 52(C).
    4. Anderson, Alyssa Gray, 2019. "Ambiguity in securitization markets," Journal of Banking & Finance, Elsevier, vol. 102(C), pages 231-255.

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    Keywords

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