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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Taking into account liquidity risks when calculating volatility
I am looking at bonds where some are more liquid than others, in that some bonds have a much higher volume than others. If I am holding a bond X with more liquidity than bond Y, but X and Y receive ...
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Understanding the Impact of Illiquidity on Equivalent Martingale Measures (EMMs) in a Simple Market
I'm currently studying a simple market model with an asset $S$ whose price follows a geometric Brownian motion ($dS_t=S_t(μdt+σdW_t)$) and a risk-free asset $B$ ($dB_t=B_trdt$) over a finite horizon $...
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Liquidity of SPX options with tenors over 2 years
I see that Bloomberg provides SPX index volatility surface values for option tenors up to and including 5 years. I used option tenors of up to 2 years in the past (over five years ago) when I worked ...
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NFT Floor Price
I'm interested in modeling NFT Floor Price. Specifically, I'm trying to answer the question:
Given current bid-ask info on an NFT collection, what is the probability distribution of the lowest ask ...
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Why is the half spread considered the transaction cost?
I know there are other questions that address this, but I'm a little confused on the intuition.
For ex, say bid is 100, the weighted mid is 100.4, and the ask is 101. I want to sell now, so I aggress ...
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Now that Zipline is no longer being maintained. What back testing alternative would you recommend
I am building a self hosted stack so there has been a lot of trial and error in order to head off a headache or two I thought I would reach out for a group opinion. I am evaluating back testers and I ...
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Market Fragmentation
Consider a scenario where a security can be exchanged on two exchanges A and B. A trader who has access to A and B with same execution probabilities submit an order and split it between A and B ...
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Liquidity Preference Hypothesis and Yield Curve
Unlike under the Expectation Hypothesis (for which the forwards are perfect predictors of the expected short rates), for the LPH forward=expected short rates + LP and consequently the expected short ...
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Gueant–Lehalle–Fernandez-Tapia formulas for varying volatility
There are formulas proposed by Gueant–Lehalle–Fernandez-Tapia related to the optimal bid and ask in market-making models (Optimal Market Making by Gueant or The Financial Mathematics of Market ...
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Liquidity assessment for OTC derivatives
How does a bank assess the liquidity of OTC derivatives such as swaps, options, and forwards, for which there isn't public data regarding trading volume?
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What is selling intensity, loss intensity, and how can I calibrate them?
Thought asking around on a problem I'm currently facing.
I have a hypothetical multi-asset portfolio of equities and bonds, on which I'm trying to measure it's liquidity risk in stressed periods. I've ...
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Liquidity Rebate
I have one question regarding the liquidity rebate that liquidity providers receive. I've read on investopedia that it refers to the traders/investors who place limit orders since they then "...
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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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How do brokerage firms provide liquidity?
Do they directly put limit orders on the order book? Or do they automatically fill limit/market orders from customers and have offsetting position with their market maker(LP) to offset their net ...
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How Market makers work
Is it true that approved market makers are simply taking the other side of the orders from retail or maybe institutions whatever the price is without actually being on the order book, and they also ...
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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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Estimating Amihud's illiquidity in Python
I have found the following code in the book Python for Finance by Yuxing Yan, in page 267 for estimating Amihud's illiquidity
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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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What are the quantitative requirements to distinguish between asset classes?
What are the quantitative criteria to distinguish between asset classes? I ask this as many institutional investors are undergoing strategic and tactical asset class decisions at the moment. How ...
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How to clarify "Predatory trading" process?
Brunnermeier, 2005 studied the "predatory trading"
This paper studies predatory trading, trading that induces and/or
exploits the need of other investors to reduce their positions. We
show ...
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Filtering options for IV surface and construction for cryptocurrencies
I'm new to quant finance and currently working on my first project.I'm trying to construct the Implied volatility surface for cryptocurrencies from deribit ( as options from deribit are the most ...
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Measuring extra return investors demand for a stock which cannot be sold?
How to roughly measure how much premium investors would demand if a stock could not be sold and its investors had to stick with it permanently using just dividends not capital gain as return?
I am not ...
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Literature on liquidity risk: Amihud (2002) vs Pastor and Stambaugh (2003)
Why is it the case that literature which studies liquidity risk often use the Amihud (2002) measure, whilst in factor pricing a liquidity portfolio based on the Pastor and Stambaugh (2003) liquidity ...
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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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how to define liquidity in equity, index, and etf options
i've heard several ways to put a metric on liquidity of options.. obviously liquidity isn't a constant.. things like the Bid/Asks spread, liquidity of the underlying.. Trying to find a way to ...
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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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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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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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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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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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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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Liquidity diversification
The liquidity diversification can be measured by the liquidity score, defined here as the ratio between the pure market P&L CVaR and the market+liquidity P&L CVaR.
I have tried to reproduce ...
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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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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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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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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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