Market liquidity is the ease of trading an asset. Its risk is the potential loss, because a security can only be traded at high or prohibitive costs. While the omnipresence and importance of market liquidity is widely acknowledged, it has long remained a more or less elusive concept. Treatment...

Market liquidity risk, the difficulty or cost of trading assets in crises, has been recognized as an important factor in risk management. Literature has already proposed several models to include liquidity risk in the standard Value-at-Risk framework. While theoretical comparisons between those...

It has been frequently discussed, that returns are not normally distributed. Liquidity costs, measuring market liquidity, are similarly non-normally distributed displaying fat tails and skewness. Liquidity risk models either ignore this fact or use the historical distribution to empirically...

In the existing literature on barrier options, much effort has been exerted to ensureconvergence through placing the barrier in close proximity to, or directly onto, thenodes of the tree lattice. In this paper we show that this may not be necessary toachieve accurate option price...

Survey and option data are used to take a fresh look at the equity premium puzzle.Survey data on equity returns (Livingston survey) shows much lower expected excess returns than ex post data. At the same time, option data suggests that investors perhaps overestimate the volatility of equity...

We investigate the consequences for value-at-risk and expected shortfall purposes of using a GARCH filter on various mis-specified processes. In general, we find that the McNeil and Frey (2000) two step procedure has very good forecasting properties. Using an unconditional non filtered tail...

Experimental stock markets are used to add some more evidence that Blacks (1976) leverage effect in financial markets does not necessarily stem from the financial leverage of the firm. We surprisingly find a large number of markets in which the leverage effect is observed although the underlying...