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 "identifier": "kaal:entity:liquidity-risk",
 "name": "Liquidity risk",
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 "author": {
  "@type": "Person",
  "name": "Wulf A. Kaal",
  "identifier": "https://orcid.org/0000-0003-0757-275X"
 },
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1558614-002",
   "identifier": "kaal:claim:1558614-002",
   "text": "The German ABCP conduit model, which financed long term American mortgage loans with short term paper and pocketed the spread, was profitable only for as long as new buyers for the short term paper could be found, so the model collapsed the moment institutional buyers withdrew.",
   "abstract": "A signifi- cant downside of this business model, however, was liquidity and re- sale risk—profiting through the spread only worked while the con- duit (i.e. Rhineland Funding) found buyers for the ABCP it issued",
   "citation": "Painter and Kaal, Initial Reflections on an Evolving Standard Constraints on Risk Taking by Directors and Officers in (2010). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1558614",
   "datePublished": "2010",
   "claim_type": "mechanism",
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   "is_failure_mode": true,
   "scope_conditions": [
    "long term assets funded by short term asset backed commercial paper",
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2714974-033",
   "identifier": "kaal:claim:2714974-033",
   "text": "A system in which hedge funds submit position information to an authority that aggregates and publishes it cannot address liquidity risk, because protecting proprietary information requires so much aggregation that the resulting information loses value to market participants.",
   "abstract": "Protection of proprietary information would require so much aggregation that the value of the information to market participants would be substantially reduced.",
   "citation": "Kaal and Oesterle, The History of Hedge Fund Regulation in the United States (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2714974",
   "datePublished": "2016",
   "claim_type": "failure",
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   "is_failure_mode": true,
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2714974-034",
   "identifier": "kaal:claim:2714974-034",
   "text": "A public database of nonproprietary hedge fund information might demystify the industry, but it would not address the central policy concern that opacity creates liquidity risk.",
   "abstract": "Such a public database might demystify hedge funds, but it would not address the central policy concern that opacity creates liquidity risk.",
   "citation": "Kaal and Oesterle, The History of Hedge Fund Regulation in the United States (2016). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2714974",
   "datePublished": "2016",
   "claim_type": "failure",
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    "applies to public databases limited to nonproprietary information"
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2748096-016",
   "identifier": "kaal:claim:2748096-016",
   "text": "Even if the risks hedge funds pose to financial institutions are often overstated, liquidity risk remains a serious issue because of the critical linkages created by over-the-counter credit risk relations.",
   "abstract": "While the risks to financial institutions are often overstated, liquidity risk remains a serious issue due to the critical linkages created by over-the-counter credit risk relations.",
   "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096",
   "datePublished": "2016",
   "claim_type": "mechanism",
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   "is_failure_mode": false,
   "scope_conditions": [
    "applies where hedge fund exposures run through over-the-counter credit relationships"
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  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2748096-033",
   "identifier": "kaal:claim:2748096-033",
   "text": "Hedge fund redemption policies are not irrelevant to risk: the rewards to liquidity risk are positive in part because redemption gates allow hedge funds to avoid asset fire sales.",
   "abstract": "In contrast, Teo finds that the rewards to liquidity risk are positive in part because redemption gates help hedge funds avoid asset fire sales.",
   "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096",
   "datePublished": "2016",
   "claim_type": "mechanism",
   "confidence": "evidenced",
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    "funds with redemption restrictions such as gates"
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   "@id": "https://wulfkaal.github.io/claims/2748096-035",
   "identifier": "kaal:claim:2748096-035",
   "text": "Once liquidity risk is incorporated into the analysis, the superior performance previously attributed to predictability in managerial skills disappears in hedge fund portfolios.",
   "abstract": "They find that the outperformance previously attributed to predictability in managerial skills disappears in hedge fund portfolios when accounting for liquidity risk.",
   "citation": "Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096",
   "datePublished": "2016",
   "claim_type": "failure",
   "confidence": "evidenced",
   "is_failure_mode": true,
   "scope_conditions": [
    "hedge fund portfolios formed on predictability in managerial skill"
   ],
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2811729-015",
   "identifier": "kaal:claim:2811729-015",
   "text": "Proposed Rule 18f-4 would be highly limited in mitigating liquidity and other risks in an unconstrained mutual fund portfolio, because material leverage, counterparty, and liquidity risks in such a fund can arise from investments in a range of non-derivative instruments that the rule does not reach.",
   "abstract": "in mitigating significant liquidity or other risks in a UMF portfolio is therefore potentially (highly) limited, as material leverage, counter-party, liquidity, and other risks to a particular UMF could arise from the fund's investments in a range of non-derivative instruments,",
   "citation": "Wulf A. Kaal, Unconstrained Mutual Funds and Retail Investor Protection (2016). SSRN: https://ssrn.com/abstract=2811729",
   "datePublished": "2016",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "proposed Company Act Rule 18f-4 as proposed in December 2015",
    "unconstrained mutual funds with broad investment authority"
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   "status": "current"
  },
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/3949098-025",
   "identifier": "kaal:claim:3949098-025",
   "text": "If the public fails to purchase the capped amount of a token opportunity, the DAOIC must sacrifice its own liquidity and buy the remaining part of the sale, so firm commitment underwriting turns a collective misjudgment of public demand into a capital obligation.",
   "abstract": "Should the public fail to purchase the capped amount of the token opportunity, the DAOIC will have to sacrifice its own liquidity and commit to buy the remaining part of the token opportunity sale.",
   "citation": "Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098",
   "datePublished": "2021",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "firm commitment underwriting",
    "public demand falls short of the capped amount"
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 "description": "8 claims in the published works of Wulf A. Kaal carry the concept tag 'liquidity-risk'. Derived node: a roster, not an adjudicated definition."
}