volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to … using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … underlying market, as measured by the liquidity of the latter market. In a perfect hedge world, spreads arise from the …

Extreme market outcomes are often followed by a lack of liquidity and a lack of trade. This market collapse seems … particularly acute for markets where traders rely heavily on a specific empirical model such as in derivative markets. Asset …-returns distribution. To explore the connection of uncertainty with liquidity, we specify a simple market where a monopolist financial …

We provide a model that links an asset's market liquidity - i.e., the ease with which it is traded - and traders …' funding liquidity - i.e., the ease with which they can obtain funding. Traders provide market liquidity, and their ability to … are charged, depend on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and …

monitor markets continuously. We study how limit order markets absorb transient liquidity shocks, which occur when a …

national best bid and offer. Enhanced order flow to dark venues reduces price competition by exchange liquidity providers …

Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic …, even though this risk could be borne more efficiently by derivative counterparties. In addition, because super …-senior derivatives dilute existing creditors, they may lead firms to take on derivative positions that are too large from a social …

, instituted a mutual guarantee fund to prevent broker failures from snowballing into a general liquidity crisis. The creation of …