Contagion in Liquidity Risk Sparks Market Chaos During Financial Crisis.
Fund managers face liquidity risks from market and funding issues. This study examines how market liquidity problems can lead to funding liquidity problems, using CDS Bond Spread basis as an indicator. During the 2007-2008 financial crisis, contagion effects were observed in the emerging sovereign debt market, impacting both prices and liquidity. This highlights the risk of asset managers being stuck with unwanted positions due to a lack of market liquidity.