Feng, Shih-Ping; Hung, Mao-Wei; Wang, Yaw-Huei - In: Journal of Financial Markets 18 (2014) C, pp. 77-95
This study develops a liquidity-adjusted option pricing model that demonstrates the impact of the liquidity risk on stock prices using a liquidity discount factor. The discount factor relates to both mean-reversion stochastic market liquidity and the sensitivity of stock prices to market...