A liquidity measure based on consideration and price range is proposed. Initially defined for daily data, Liquidity Index (LIX) can also be estimated via intraday data by using a time scaling mechanism. The link between LIX and the liquidity measure based on weighted average bid-ask spread is established. Using this li…
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48 results for “liquidity estimation”
Develops a new model to better estimate cryptocurrency and stock volatility.
problem Misrepresentation of volatility and co-movement in traditional models.
method Introduces liquidity-sensitive multivariate volatility framework with novel liquidity measures.
result Liquidity-adjusted models yield more stable and interpretable risk structures.
The paper uses option theory to estimate corporate bond liquidity spreads.
problem Estimating liquidity spreads for corporate bonds.
method Option-theoretic approach considering risk-free rate volatility and credit risk.
result The model provides a robust tool for pricing illiquid bonds.
Research proposes a model to estimate transaction costs and assess asset liquidity risk.
problem Lack of standardized models for asset liquidity risk in asset management.
method Develops a market impact model and a two-regime model based on power-law property.
result Defines liquidity measures and applies model to stocks and bonds.
L'effet de levier de trésorerieq-fin.GN
The effect of leverage on liquidity is a tool for analysing the level of liquidity for a given production process. It measures the sensitivity of the level of liquidity that results from changes in the volume of production and unit operating margin. A commercial activity is liquid at the moment when all costs are cover…
Backtesting Framework for Concentrated Liquidity Market Makers on Uniswap V3 Decentralized Exchangeq-fin.MF
Backtesting framework for CLMMs on Uniswap V3 reduces reward estimation error.
problem Estimating rewards for CLMMs in Uniswap V3 liquidity pools.
method Parametric model for liquidity distribution, historical data analysis.
result Error in reward estimation less than 1% for each pool.
Study analyzes impact of concentrated liquidity on trading fees and provider returns.
problem Impact of concentrated liquidity on trading fees and provider returns.
method Comparison of average liquidity provider returns before and after concentrated liquidity introduction; quantification of fundamental strategies performance.
result Concentrated liquidity strategies outperform in certain trading pairs and market conditions.
Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus delivering low costs of transaction. Providing a rigorous and empirically relevant d…
The study finds a liquidity premium in stock returns, but only after correcting for microstructure noise.
problem The positive association between expected idiosyncratic volatility and expected stock returns.
method Developed a novel method to eliminate microstructure influences from stock returns and estimate idiosyncratic volatility.
result The liquidity premium in value-weighted portfolios is driven by liquidity in the prior month after correcting for microstructure noise.
Tick-by-tick liquidity provision aims to maximize fees and reserves.
problem Maximizing fees and reserves in concentrated liquidity.
method Convex optimization for tick-level liquidity provision.
result Concentrating liquidity around current price is not always best.
Estimating physical properties from liquid crystal textures via machine learning and complexity-entropy methodsphysics.data-an
Machine learning and complexity-entropy methods estimate liquid crystal properties from textures.
problem Extracting physical properties from liquid crystal textures.
method Combining permutation entropy, statistical complexity, and machine learning.
result Significant precision in predicting physical properties of liquid crystals.
This paper develops a model of liquidity provision in financial markets by adapting the Madhavan, Richardson, and Roomans (1997) price formation model to realistic order books with quote discretization and liquidity rebates. We postulate that liquidity providers observe a fundamental price which is continuous, efficien…
A new method to dynamically manage dark liquidity to balance capturing available liquidity and protecting from signalling.
problem Limiting access to dark venues and imposing minimum fill sizes restricts liquidity and can lead to excessive signalling.
method Dynamic monitoring of dark liquidity on a per fill basis, allowing real-time adjustments to trading exposure.
result The method allows traders to maximize available liquidity while protecting from excessive signalling.
Study finds no significant short-term impact on liquidity supply after protocol fees were reduced.
problem Liquidity provider welfare is affected by protocol fees, but the impact on liquidity supply is unclear.
method Used a matched-overlap event-study difference-in-differences design to estimate the liquidity-supply response to take-rate cuts.
result No significant short-term impact on active liquidity or local depth; no change in LP participation or composition.
The study examines pricing American options with both exogenous and endogenous transaction costs.
problem Pricing American options with transaction costs and liquidity risks.
method Modeling liquidity risks as a mean-reverting process and transaction costs as proportional to trading amount. Two nonlinear PDEs are used to characterize option values. Numerical solution via ADI method and model calibration using maximum likelihood estimation.
result The model incorporating liquidity risks significantly outperforms the Leland model.
Optimal liquidation with temporary and permanent price impact, an application to cryptocurrenciesq-fin.TR
The paper analyzes optimal liquidation strategies for cryptocurrencies considering both temporary and permanent price impacts.
problem Optimal liquidation strategies for cryptocurrencies in the presence of price impacts.
method Analytical and numerical solutions, including finite differences and optimal policy iteration.
result Optimal liquidation policies vary based on the functional form of temporary and permanent price impacts.
Liquidity Stress Testing in Asset Management -- Part 1. Modeling the Liability Liquidity Riskq-fin.RM
This research proposes methods to model and assess liability liquidity risk in asset management.
problem Lack of standardized models for liability liquidity risk in asset management.
method Statistical models, zero-inflated models, aggregate and individual-based approaches, and factor models.
result Developed mathematical and statistical approaches to estimate and assess redemption shocks.
Method solves dynamic portfolio optimization with liquidity costs and market impacts.
problem Dynamic portfolio optimization with liquidity costs and market impacts.
method Simulation-and-regression approach extending least squares Monte Carlo algorithm.
result Validated method with realistic cash-and-stock portfolio, quantifying certainty equivalent losses.
This paper analyzes the configurations of shapes that shows a spacelike liquid drop in Minkowski space deposited over a spacelike plane . We assume the presence of a uniform gravity field directed toward and that the volume of the drop is prescribed. Our interest are the liquid drops that are critical points of …
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his portfolio instantly and waits for a more favorable offer. To minimize losses in this …
The study uses equity order flow to forecast stock returns and resolves the liquidity premium puzzle.
problem The liquidity premium and its relation to investment horizons.
method Directly estimated Kyle's price-impact coefficient λ from daily equity order flow data.
result Signed order flow predicts stock returns, with volume volatility predicting lower returns.
Model estimates LIBOR rates and finds COVID-19 spread spike due to credit risk.
problem Estimating LIBOR rates and understanding the factors affecting them.
method Developed a joint model for various LIBOR-related rates and used it to decompose spreads.
result Credit risk mainly caused the spike in LIBOR-OIS spread during the COVID-19 onset, with equal contributions from credit and funding-liquidity risks on average.
New method identifies algo trading strategies as liquidity consumers or providers.
problem Determining if algo trading strategies consume or provide liquidity.
method Analyzes trade and price history to classify strategies as liquidity consumers or providers.
result Identifies net liquidity consumption or provision of algo trading strategies.
Develops numerical methods for pricing exchange options in a market with limited liquidity.
problem Pricing European style exchange options in a market with finite liquidity.
method Integrates price impact into the dynamics of correlated assets using a controlled variate approach.
result Numerical pricing methods for exchange options are developed and validated.
Model quantifies market price of trading liquidity risk and market depth.
problem Analyzing the market price of trading liquidity risk and market depth.
method Introduced a framework to analyze market price of liquidity risk, derived inhomogeneous Bernoulli ODE, obtained closed form solutions.
result Market depth encapsulates the market price of liquidity risk.
Study on liquidity providers' performance in decentralized exchanges.
problem Unclear profitability of liquidity providers in decentralized exchanges.
method Reconstructing LP PnL dynamics from on-chain events, introducing a new metric.
result Only about one out of six LPs avoids losses, suggesting open questions about LP participation motives.
Study assesses the impact of Basel III reforms on Bangladeshi banks.
problem Impact of Basel III liquidity and capital requirements on Bangladeshi banks.
method Panel data analysis with fixed effects, including macroeconomic variables.
result Higher capital and liquidity requirements negatively affect banks' profitability but positively impact interest rates and private sector lending.
Study tail risk in high-frequency finance using -regularized regression.
problem Measuring tail risk dynamics in high-frequency financial markets.
method Dynamic extreme value regression model with -regularized maximum likelihood estimator.
result Severity of extreme losses well predicted by low price impact in high volatility periods.
New model reveals latent liquidity in financial markets.
problem Understanding the connection between latent and observable order books.
method Suggests a simple mechanism for revealing latent liquidity and quantifies it from real data.
result Existence of a market instability threshold leading to liquidity crises.
Automated Market Makers: A Stochastic Optimization Approach for Profitable Liquidity Concentrationq-fin.TR
Optimizes liquidity provision intervals for profitable AMM participation.
problem Financial losses from poor liquidity provision intervals and reallocation costs.
method Developed a tractable stochastic optimization problem.
result Computes optimal liquidity provision intervals for profitable liquidity concentration.
Study shows how crypto asset liquidity is affected by wash trading and proposes treatment to reduce liquidity diffusion.
problem Understanding and reducing crypto asset wash trading to improve liquidity.
method Proposed a two-component model for liquidity (jump and diffusion) and demonstrated the effectiveness of autoregressive models.
result Treatment on wash trading significantly reduces liquidity diffusion but not liquidity jump.
Using recent advances in the econometrics literature, we disentangle from high frequency observations on the transaction prices of a large sample of NYSE stocks a fundamental component and a microstructure noise component. We then relate these statistical measurements of market microstructure noise to observable charac…
The study introduces new liquidity measures and models for assets with extreme liquidity.
problem Modeling assets with extreme liquidity, especially in crypto markets.
method Developed innovative liquidity premium measures, liquidity-adjusted return and volatility models, and used ARMA-GARCH/EGARCH models.
result The liquidity-adjusted models outperform traditional models in predicting asset performance at extreme liquidity.
In this paper, we provide non-parametric statistical tools to test stationarity of microstructure noise in general hidden Ito semimartingales, and discuss how to measure liquidity risk using high frequency financial data. In particular, we investigate the impact of non-stationary microstructure noise on some volatility…
Improved ARMA-GARCH model for illiquid assets like cryptocurrencies.
problem Inadequate modeling of illiquid assets, especially cryptocurrencies, with traditional ARMA-GARCH models.
method Introducing liquidity-adjusted liquidity jump and diffusion metrics into ARMA-GARCH framework.
result The liquidity-adjusted model improves model fit and volatility sensitivity for cryptocurrencies.
Optimizes liquidity provision in decentralized exchanges with utility indifference market makers.
problem Impermanent loss in decentralized exchanges without transaction fees.
method Mathematical formulation of liquidity provision, focusing on utility indifference market makers.
result No-arbitrage conditions and optimal arbitrage strategies are established.
Liquidity Stress Testing in Asset Management -- Part 3. Managing the Asset-Liability Liquidity Riskq-fin.RM
Third part of a study on liquidity risk in asset management, focusing on managing the asset-liability liquidity risk.
problem Managing the asset-liability liquidity risk in asset management.
method Develops a methodological and practical framework for liquidity stress testing programs.
result Proposes measurement, management, and monitoring tools for controlling the liquidity gap.
Modeling trading costs for correlated instruments to improve execution strategies.
problem Incorrect estimation of liquidity and suboptimal execution strategies due to neglecting cross-impact effects.
method Extending the linear propagator model to the multivariate case for correlated instruments, calibrating a cost model free of arbitrage and manipulation.
result Synchronizing the execution of correlated contracts is crucial for accurate liquidity estimation and optimal execution strategies.
This paper optimizes liquidity provision in automated market makers using auction theory.
problem Optimizing profit for a monopolist liquidity provider in automated market makers.
method Introduces a Bayesian-like belief inference framework to model AMMs, characterizes profit-maximizing strategies using Myerson's optimal auction theory.
result Characterizes the optimal demand curve and payments for an IC AMM, revealing a bid-ask spread caused by asymmetry and monopoly pricing.
Modeling Loss-Versus-Rebalancing in Automated Market Makers via Continuous-Installment Optionsq-fin.MF
This paper models AMM positions using CI options to calculate LVR and provide actionable guidance.
problem Calculating and managing adverse-selection costs in automated market makers (AMMs).
method Modeling AMM positions as perpetual American CI options to replicate delta and calculate LVR.
result LVR is identical to theta of CI options, and AMM positions have approximately constant LVR over long windows.
Study estimates default probabilities without liquid CDS, using real-world probabilities.
problem Estimating default probabilities in markets with no liquid CDS.
method Use minimum variance hedge, estimate real-world probabilities.
result Validates use of real-world probabilities for CVA calculations.
Optimal early liquidation strategy reduces financial losses during crises.
problem Substantial losses from simultaneous asset liquidation at depressed prices.
method Developed a worst-case approach for optimal early liquidation, considering uncertainty of other banks' decisions.
result Proposed robust optimal strategy maximizes liquid assets' value at clearing, even with uncertainty.
JIT liquidity providers can sometimes reduce overall market liquidity by crowding out passive LPs.
problem JIT liquidity providers can reduce overall market liquidity by crowding out passive LPs.
method Game-theoretic model with asymmetrically informed agents to analyze JIT liquidity provision in blockchain-based decentralized exchanges.
result JIT LPs only provide liquidity to uninformed orders and crowd out passive LPs when order volume is not sufficiently elastic to pool depth, potentially reducing overall market liquidity.
New framework detects crypto wash trading using liquidity measures.
problem Detecting and monitoring wash trading in crypto assets.
method Developed a new framework to detect wash trading through real-time liquidity fluctuation measures.
result Joint elevation in liquidity jump and diffusion indicates wash trading in crypto assets.
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 and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different assumptions on how liquidity rates enter the CD…
The paper solves portfolio liquidation under transient price impact for 100 NASDAQ stocks.
problem Determining optimal trading strategies under various market impact models.
method Derives explicit solutions for market impact parameters in a portfolio liquidation model.
result The derived strategy achieves significant cost savings compared to benchmark models.
We refine toxicity bounds for dynamic liquidation incentives in CP-AMM systems.
problem Ensuring stability in dynamic liquidation incentives in automated market makers.
method Derived state-dependent toxicity bounds for dynamic liquidation incentives, reconciling them with CP-AMM price dynamics.
result State-dependent bounds and liquidity-depth-only condition for dynamic liquidation incentives.
Study shows portfolio trading impacts intraday liquidity and optimizes execution strategies.
problem Impact of portfolio trading on intraday liquidity and execution strategies.
method Stylized model capturing portfolio trading, linear cross-asset market impact, optimal execution schedule.
result Optimal execution schedule can reduce costs by up to 6% compared to separable VWAP-like approach.