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We report the results of an experimental test of alternative auction designs suitable for pricing and removing troubled assets from banks’ balance sheets as part of the financial rescue planned by...
We build a model that helps to explain why increases in liquidity—such as lower bid–ask spreads, a lower price impact of trade, or higher turnover—predict lower subsequent returns in both firm-level a...
A model is developed where firms in a financial system have to settle their debts to each other by using a liquid asset. The question that is studied is how many firms must obtain how much of this ass...
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to tr...
Within the context of risk integration, we introduce in risk measurement stochastic holding period (SHP) models. This is done in order to obtain a `liquidity-adjusted risk measure' characterized by t...
Credit networks represent a way of modeling trust between entities in a network. Nodes in the network print their own currency and trust each other for a certain amount of each other's currency. This...
Traditional market makers are losing their importance as automated systems have largely assumed the role of liquidity provision in markets. We update the model of Glosten and Milgrom (1985) to analyz...
We review different approaches for measuring the impact of liquidity on CDS prices. We start with reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi an...
With the pending US adoption of International Financial Reporting Standards (IFRS) and the potential elimination of last-in-first-out (LIFO) as an accepted inventory valuation method, the use of LIFO...
We introduce a microscopic model for the dynamics of the order book to study how the lack of liquidity influences price fluctuations. We use the average density of the stored orders (granularity g) as...

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