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Stock liquidity and default risk [PDF]
Journal of Financial Economics, 2017 Abstract This paper examines the impact of stock liquidity on firm bankruptcy risk. Using the Securities and Exchange Commission decimalization regulation as a shock to stock liquidity, we establish that enhanced liquidity decreases default risk. Stocks with the highest default risk experience the largest improvements.
Jonathan Brogaard, Ying Xia
exaly +4 more sources
Latency and Liquidity Risk [PDF]
SSRN Electronic Journal, 2019 Latency (i.e. time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity, takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB) might undergo updates, so there is no guarantee that MLOs are filled.
Cartea, A +2 more
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Liquidity Risk and Contagion [PDF]
Journal of the European Economic Association, 2005 This paper explores liquidity risk in a system of interconnected financial institutions when these institutions are subject to regulatory solvency constraints and mark their assets to market. When the market's demand for illiquid assets is less than perfectly elastic, sales by distressed institutions depress the market prices of such assets. Marking to
Rodrigo Cifuentes +2 more
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The Risk Components of Liquidity [PDF]
SSRN Electronic Journal, 2008 Does liquidity risk differ depending on our choice of liquidity proxy? Unlike literature that considers common liquidity variation, we focus on identifying different components of liquidity, statistically and economically, using more than a decade of US transaction data.
Chollete, Lorán +2 more
openaire +5 more sources
Liquidity Risk in Banking: Is There Herding? [PDF]
SSRN Electronic Journal, 2012 Abstract: Banks individually optimize their liquidity risk management, often neglecting the externalities generated by their choices on the overall risk of the financial system. This is the main argument to support the regulation of liquidity risk. However, there may be incentives, related for instance to the role of the lender of last resort, for ...
Bonfim, D., Kim, M.
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SSRN Electronic Journal, 2018 Liquidity manifests itself as the ability of a, to have, at its disposal, sufficient working capital to continue with its current business activities. Liquidity risk is among leading financial risks in banking and it is extremely important because the liquidity of a bank is considered to be one of the most basic conditions of banking in modern market ...
Rohit Singla, Jeffrey Pontiff
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Pervasive Liquidity Risk [PDF]
, 2007 While there is no equilibrium framework for defining liquidity risk per se, several plausible arguments suggest that liquidity risk is pervasive and thus may be priced. For example, market frictions increase the cost of hedging strategies requiring frequent portfolio rebalancing.
B. Espen Eckbo, Oyvind Norli
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Risk measuring under liquidity risk [PDF]
Applied Mathematical Finance, 2014 We present a general framework for measuring the liquidity risk. The theoretical framework defines a class of risk measures that incorporate the liquidity risk into the standard risk measures. We consider a one-period risk measurement model. The liquidity risk is defined as the risk that a given security or a portfolio of securities cannot be easily ...
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Endogenous Systemic Liquidity Risk [PDF]
SSRN Electronic Journal, 2009 Traditionally, aggregate liquidity shocks are modelled as exogenous events. Extending our previous work (Cao & Illing, 2007), this paper analyses the adequate policy response to endogenous systemic liquidity risk. We analyse the feedback between lender of last resort policy and incentives of private banks, determining the aggregate amount of ...
Cao, Jin, Illing, Gerhard
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Liquidity Commonality and Risk Management [PDF]
SSRN Electronic Journal, 2012 Discussion Paper / SFB 823 ; 09 ...
Supper, Hendrik, Weiß, Gregor N.F.
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