By computing a volatility index (CVX) from cryptocurrency option prices, we analyze this market's expectation of future volatility. Our method addresses the challenging liquidity environment of this young asset class and allows us to extract stable market implied volatilities. Two alternative...

We study the impact of ambiguity on two alternative institutions of financial intermediation in an economy where consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their additive beliefs. We analyze the optimal liquidity...

I model a financial market that dries out in the wake of premature liquidations. Two main results are obtained. First, liquidity may vanish even if small, riskneutral buyers could easily compensate the ongoing selling. Thus, more markets are vulnerable to “runs” than suggested by previous...

Estimation of benchmark yield curve in developing markets is often influenced by liquidity concentration. Based on an affine term structure model, we develop a long run liquidity weighted fitting method to address the trading concentration phenomenon arising from horizon-induced clientele...

Using data from the Taiwanese stock market, an emerging market, this paper documents positive changes in liquidity and volatility around seasoned equity offerings (SEOs). These findings are consistent with the uncertain signal hypothesis that investors with diverse views on the information...

We study the impact of ambiguity on two alternative institutions of financial intermediation in an economy where consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their additive beliefs. We analyze the optimal liquidity...

For an economy with dysfunctional intertemporal financial markets the financial sector is modelled as a competitive banking sector oering deposit contracts. In a setting similar to Allen and Gale (1998) properties of the optimal liquidity provision are analyzed for illiquid assets with ambiguous...

We examine impediments to liquidity provision by mutual funds to insurance companies during corporate bond fire sales. We find that financial regulation and limited capital capacity significantly affect liquidity provision. Mutual funds reduced their purchase of fire sale bonds following...

The recent financial turmoil has triggered a credit crunch whereby illiquid, but not necessarily insolvent, banks were not able to borrow money and were forced to be liquidated, bought or bailed out. A response to this problem has been contingent convertible bonds (or CoCo bonds), which are...

In responding to the severity and broad scope of the financial crisis that began in 2007, the Federal Reserve has made aggressive use of both traditional monetary policy instruments and innovative tools in an effort to provide liquidity. In this paper, I examine the Fed's actions in light of the...