Korn, Olaf; Krischak, Paolo; Theissen, Erik - 2014
We develop a model of the illiquidity transmission from spot to futures markets that formalizes the derivative hedge … futures market, but rather interacts with price risk, liquidity risk, and the risk aversion of the market maker. The … predictions of the model are tested empirically with data from the stock market and the market for single-stock futures. The …