Financial institutions also create maturity mismatches on their off-the-balance-sheet, for example, by investing in structured credit products through structured investment vehicles (SIVs). In addition, financial institutions generate maturity mismatches beyond the national border, as witnessed in the surge in cross-border lending during the credit boom preceding the current crisis. Second, the risk-taking channel appears as an increase in asset prices.
The availability of funds directly influences asset prices, and, more importantly, it also influences asset prices in an indirect way by influencing market liquidity of particular assets. As the availability of funds improves and more investors participate into the markets, the market transactions become easier in both sale and purchase, thus expanding market liquidity at an accelerated pace.