Questions tagged [liquidity]

Liquidity is easy to define qualitatively (the easiness to buy or sell an asset), but difficult to measure.

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26 views

Calculation of Expected Shortfall using IMA Approach ( FRTB)

I am trying to calculate the Expected shortfall of a FX portfolio through IMA Approach of FRTB in excel . I have used several combinations in excel to get the liquidity horizons and then calculate the ...
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Estimating midpoint or realized spread from trade by trade data without order book data

I am looking to estimate the realized spread defined as $$ \text{realized spread} = 2D_k(ln(P_k) - ln(M_{k+5})) $$ Where $D_k$ is 1 for buy transactions and -1 for sell transactions. $P_k$ is the ...
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cme options volume

I am lookin at https://www.cmegroup.com/trading/interest-rates/stir/eurodollar_quotes_volume_voi.html?foi=O&optionProductId=3#tradeDate=20210312. It says about 16 million in options was traded. ...
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Liquidity measures for Commodities Futures

I would like to find a way to measure Liquidity for Commodities Futures. I found the following 4 papers/definitions: Volume (Share / Dollar) (Dollar Volume Liquidity) Amivest Liquidity Ratio (...
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Bid-ask spread using transactions data [duplicate]

In the absence of quotes data, I'm looking to calculate the realized bid-ask spread using (high-frequency) transactions data. Is there a standard method of doing this? Many thanks.
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84 views

Spread and outright futures ranked by liquidity

Is there a platform that ranks spread and outright futures by liquidity and/or by volatility?
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75 views

Market impact in stress

I am trying to model the price impact in stress for a period of several days. Specifically, I am looking for a function/model that predicts the price movement ...
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72 views

How is the futures price set on days without trades?

In an illiquid (commodity) futures market, several days may pass between trades in a contract. If the traders' positions must be marked to market every day, a price must be quoted even on days without ...
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316 views

What are some currently open problems in market microstructure

I've been reading up on market microstructure models and toyed around with them -- i.e., I got simulations for Roll (1984), Glosten-Milgrom (1985), Kyle (1985), Kyle (1985) with multiple periods. I am ...
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181 views

Why are Index/ETF put option volumes generally higher than the call option volumes?

It seems like put options on Index/ETFs generally have 50% more volume than call options, in terms of notionals. We don't see the same put/call volume ratios in single stocks. Why is that the case? I ...
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76 views

How do locked markets get resolved in a low-volume market?

Consider a low-volume exchange-traded security that sometimes sees no trading volume for days on end. Examples of such securities are some bonds, preferred shares, SPACs, and ETFs listed on the NYSE ...
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55 views

What is liquidity seeking?

I heard that liquidity seeking is an opportunistic tactic aiming at sourcing additional liquidity from hidden orders. Could somebody explain this to me please?
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122 views

Why is the liquidity of ATM options often relatively low even though the underlying security is being traded in large quantity?

I am trying to learn more about options trading and option strategies. One thing that I have noticed is that for a lot of large cap stocks such as KO and UPS, very often there is a very low open ...
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60 views

FX convertability modelling: have FX markets ever closed down?

I am working on modelling the risk that a bank's cash in one currency could not be converted into another currencies. This convertability risk has liquidity implacations for the asset liabilities ...
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66 views

liquidity of a portfolio of options

In the asset management industry, many reports contain liquidity metrics such as the no. of days to liquidate 95% of a position, based on a certain participation rate. If that position is a stock or a ...
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93 views

Implied volatility of hypothetical options market

I am attempting to create a volatility surface for a US electricity market that has a liquid futures market but nearly non-existent options market (<5 trades per month across all strikes and ...
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68 views

Estimating risk aversion from option bid-ask spreads

Is it possible to use bid-ask spreads on contracts from a specific tenor to estimate risk aversion and use it to transform risk-neutral density into real-world density?
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258 views

How to make a trading universe of liquid futures contracts

I am forming a universe of liquid futures/liquid FX forwards. I want a list of all liquid contracts, the key word being liquid. This is for an academic project, but you could imagine liquid being ...
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73 views

Stressing liquidity (time to liquidate) of a long only equity fund using participation rate or bid ask

My company is looking to launch a new long only global equity fund. The product committee wishes to see a risk analysis covering various risks, including liquidity. The main measure is time to ...
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192 views

How does liquidity affect trading costs?

I am aware that the liquidity of a stock directly affects the trading costs associated with it. I am however unsure about the direction of this effect, since I hypothesize two counteracting forces: ...
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675 views

International Baccalaureate - Balance Sheet Format [closed]

I would like to transform Tesla's balance sheet (https://www.nasdaq.com/symbol/tsla/financials?query=balance-sheet) into the IB-balance sheet format (see below). In the current assets section, is it,...
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80 views

Measuring liquiduity of a portoflio of bonds

I'm currently looking into applying bond liquidity out of curiousity. The Method i'm currently using is the Barclays LCS score (live.barcap.com/publiccp/RSR/nyfipubs/barcap-email-mkting/qps/LCS_In-...
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73 views

CDS pricing using intensity models incorporating liquidity

I want to price a CDS using an intensity based model, but I want to account for liquidity as well. General model: The default time $\tau$ is the first jump time of a cox process, and the survival ...
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292 views

Using option pricing methods to model real asset liquidity

Liquidity risk (in the sense of asset exit risk) is warranted on investments that may not be easily divested at the going market or fair-value price. I am looking at a portfolio of private assets ...
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184 views

Fama-Macbeth with Liquidity Sorted Portfolios

I'm currently working on a paper in which I'm trying to see whether the liquidity premium is an observable phenomena when taken into the context of computer games. From my research online I've found ...
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222 views

what is liquidation value in kyle (1985) model

I am thoroughly reading my first academic literature and I have found myself overwhelmed by terms that have been generalised in my studies. It is from "Continuous Auction and Insider Trading" by ...
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103 views

Application of Extreme Value Theory in banking liquidity risk analysis

The regulator forces banks to assess their (intraday) liquidity risk in normal and stressed conditions see e.g. BCBS 144 principle 9. To me this sounds pretty much like a possible application of EVT ...
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148 views

Bond liquidity: why do I observe constant bid-ask spreads?

I hope you can help me. I want to use the bid-ask spread of prices for 10yr treasury notes as a proxy for bond market liquidity. I got monthly aggregated bond price data (for yrs 1999-2013) from ...
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217 views

What makes open-outcry preferable to electronic trading and what are its consequences?

I recently visited the trading floor of CBOE where especially the pits of SPX and VIX are relatively crowded and open outcry is still performed. I was surprised to hear that the traded volume is non ...
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216 views

Cost of liquidation

In the text book on Risk Management by John Hull, The cost of liquidation is defined as one half of spread between bid price and ask price. Investopedia justifies the one half factor by saying that ...
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481 views

Basis swap pricing dynamics

The existence of basis spreads leads to that e.g. a 6M forward rate has a different price than two after each other following 3M forward rates. This due to that the 6M forward rate has a higher credit ...
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162 views

Bond Valuation and liquidity

Assuming the market is perfect liquid, the bond price can be replicated and is related as follows: $$\sum_{t=0}^{N}c_ne^{-Y(t_n-t)}=\sum_{t=0}^{N}c_nP_{t_n}=\sum_{t=0}^{N}c_ne^{-Y_{t,t_n}(t_n-t)}$$ ...
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130 views

Is there evidence that delta-hedging of large investors affects markets?

I would expect that many traders hedge their exposure before market closing based on their positions. In order to determine the timing of readjustment, there should probably two channels affect the ...
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66 views

weird stationary pattern in LDO.MI's stock price

how to describe this pattern in Leonardo Finmeccanica's share price (observed here)? It is a fairly liquid stock, but the price seems to alternate between ca. 8 and ca 13!! Does anyone know what ...
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1k views

How to calculate average liquidity of a portfolio with multiple assets and weights?

I have a weighted portfolio with several assets and weights. Liquidity of my assets varies from low to high and concentration of assets in the portfolio change from one asset to another, for example ...
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208 views

Liquidity horizons of risk factors categories

I'm reading the consultative document of the BCBS on the Fundamental Review of the Trading Book: http://www.bis.org/publ/bcbs265.pdf Table 2 on page 16 shows the liquidity horizons for 5 broad risk ...
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203 views

What are the best measures of market liquidity?

Does any single metric provide a convenient way to capture depth, breadth, and resiliency, or to distinguish between transitory and persistent effects (i.e. between the stationary and random walk ...
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3k views

Liquidity Traders

I am thoroughly reading my first academic literature and I have found myself overwhelmed by terms that have been generalised in my studies. The extract is from "The Beauty Contest and Short-Term ...
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2answers
91 views

Initiating new orders with active “order-session” only?

Is it a must to establish "quote-session" & subscribing to quotes/market data before initiating a "New Order-single(Market-GTC)"? I actually can't see any use of quote-session for trading ...
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52 views

Liquidity effect in case MS decrease

What is the result if the liquidity effect is grater than other effects in case of decreased money supply? I got this question on the exam, In case of an increase in the money supply by the central ...
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75 views

What are the causes of incorrect prices in the market?

If market resiliency, a measure of liquidity, is the amount of time it takes a market to bounce back from temporarily incorrect prices, then what makes a price "incorrect"? Is this like fat-finger ...
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241 views

Estimating an appropriate haircut for illiquid stocks

I am trying to determine an appropriate haircut for a basket of illiquid stocks that barely traded during the year. Can someone suggest me an approach to estimate the risk? My dataset has a lot of ...
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417 views

Research topics - neural networks and market liquidity

I am a masters student looking for some direction on using neural network on market depth data to help predict market liquidity and bid-ask spreads. Can some of the more experienced people give me ...
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5k views

How do I calculate approximate equity liquidity?

I am a developer rather than a quant. I need to decide whether a given equity passes some basic liquidity threshold. It doesn't have to be precise, just good enough. I have a Bloomberg terminal data ...
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88 views

Settlement/Spot/(bid ask spread) ratio

Are there any studies on the average difference or ratio between Settlement (execution price) and the Spot price dependant on lot size. I'm looking for a function such as ...
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826 views

Intraday versus daily volatility in slippage estimation

On page 21 of http://www.cims.nyu.edu/~almgren/papers/costestim.pdf Almgren has the formula $\displaystyle{\text{Slippage} = \frac{1}{2}\gamma\sigma\frac{X}{V}\left(\frac{\Theta}{V}\right)^{\frac{1}{...
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Charting order depth over time periods

I do a lot of analysis on order flow, tape reading, as it gives insight into what market participants want, or may be willing to do. In comparison, price charts show what happened, and technical ...
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333 views

Impact on bid/offer due to volume/size of trades placed

When observing bid/offer in the market I came across a question. How much trading a bond would impact its spread for subsequent trades ie. what is the impact on bid/offer due to volume/size of ...
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323 views

Share Repurchase and Bid ask Spread data

I am doing a Quantitative Finance PhD and would like some insight on data collection. I'm looking for open market share repurchase data (UK) over the past 2-3 decades. Simultaneously, their bid-ask ...
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888 views

Transaction Costs for Currency Pairs

I have been aggregating some tick data from Oanda's streaming API to try and get an idea of the relative cost and best time to trade different currency pairs. The idea was to plot the spread of the ...