In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact in a multi-player framework by introducing strategic interactions into the Almgren & Chriss (2001) model. Speci cally, we consider a nancial market model with...

The paper presents an alternative approach to measuring systemic illiquidity applicable countries with frontier and emerging financial markets, where other existing methods are not applicable. We develop a novel Systemic Illiquidity Noise (SIN)-based measure, using the Nelson–Siegel–Svensson methodology in which we utilize curve-fitting error as indicator of system illiquidity. empirically appl...

We establish a link between illiquidity and positive autocorrelation in asset returns among a sample of hedge funds, mutual funds, and various equity portfolios. For hedge funds, this link can be confirmed by comparing the return autocorrelations of funds with shorter vs. longer redemption-notice periods. We also document significant positive return-autocorrelation in portfolios of securities t...

The illiquidity of long-maturity options has made it difficult to study the term structures of option spanning portfolios. This paper proposes a new estimation and inference framework for these option-implied term structures that addresses long-maturity illiquidity. By building a sieve estimator around the risk-neutral valuation equation, the framework theoretically justifies (fattailed) extrap...

On the Croatian stock market liquidity has never been in the focus of academic research. thus we find it necessary to observe liquidity at the aggregate level. This paper observes multi-dimensional liquidity through the impact of turnover on price change together with several one-dimensional measures. In our empirical research we applythe illiquidity measureto seven different stock markets. We ...

During the contraction from 1929 to 1933, the Federal Reserve System tracked changes in the status of all banks operating in the United States and determined the cause of each bank suspension. This essay analyzes chronological patterns in aggregate series constructed from that data. The analysis demonstrates both illiquidity and insolvency were substantial sources of bank distress. Periods of h...