credit spreads during 2002-2012: a liquidity regime and a default regime. Both regimes contribute to the patterns observed in … credit spreads. The liquidity regime seems to explain the predictive power of credit risk on the 2007-2009 NBER recession …

Arbitrage and liquidity are interrelated. Liquidity facilitates arbitrageurs’ trading on deviations from the law of one … price. However, whether arbitrage opportunity leads to an increase or decrease in liquidity depends on the cause of the … deviation. A demand shock leads to greater liquidity, while asymmetric information is toxic to liquidity. We examine how …

but, rather, interacts with price risk, liquidity risk, and the risk aversion of the market maker. The model's predictions … support our model and show that the derivative hedge theory provides an explanation for the liquidity link between spot and …

Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity … liquidity model, extending the discrete-time constant liquidity model of Madan (2010). With this extension, we can replicate the … stochastic liquidity model within our framework using multidimensional binomial trees and we calibrate it to call and put options …

changes carries important information about liquidity demand in the market. From this distribution of trader position …-changes, we construct a marketwide measure for intraday liquidity demand that does not necessarily depend on aggressive trading …. Using a rich regulatory dataset on S&P 500 E-mini futures and 10-year Treasury futures markets, we show that this liquidity …

futures market, but rather interacts with price risk, liquidity risk, and the risk aversion of the market maker. The … liquidity link between spot and futures markets. Our results provide no evidence in favor of the substitution hypothesis. …

We show that liquidity risk is priced in the cross section of returns on credit default swaps (CDSs). We measure CDS … constituents' CDS spreads, and we construct a tradable liquidity factor from returns on index arbitrage strategies. CDS contracts … with higher liquidity exposures have higher expected excess returns for sellers of credit protection and trade with wider …

relative index option liquidity. We find that, on a daily basis, option happiness is significantly dependent on the relative … liquidity between option series with different moneyness. In particular, the larger the difference in liquidity between an out … relative option liquidity measures based on bid-ask spreads, trading volumes and option price impacts. The results also show a …

This study measures liquidity in the catastrophe (CAT) bond market and the liquidity premium embedded in CAT bond … the three most effective liquidity proxies. Given these three proxies, the average estimated liquidity premium in the CAT … during the period 2002-2016. The average CAT bond liquidity premium is higher than the corporate bond liquidity premium of a …

shock to funding liquidity impacts market liquidity. After the Big Bang, traders are required to pay upfront fees to execute … aggregate after the Big Bang, they do so less for contracts that require larger fees. Furthermore, the funding effect is …