We develop a model of illiquidity transmission from spot to futures markets that formalizes the derivative hedge theory of Cho and Engle (1999). The model shows that spot market illiquidity does not translate one to one to the futures market but, rather, interacts with price risk, liquidity risk, and the risk aversion of the market maker. The model's predictions are tested empirically with data from the stock market and markets for single-stock futures and index futures. The results support our model and show that the derivative hedge theory provides an explanation for the liquidity link between spot and futures markets
While recent research has examined the asset pricing implications of systematic liquidity risk, a mo...
Futures contracts on the New York Mercantile Exchange are the most liquid instruments for trading cr...
This paper studies equilibrium asset pricing with liquidity risk the risk arising from unpredictabl...
We develop a model of the illiquidity transmission from spot to futures markets that formalizes the ...
This dissertation develops a model of the illiquidity transmission from spot to futures markets that...
Liquidity is one of the most intensively topics researched in financial economics for the last decad...
Derivatives markets can quickly become illiquid in periods of high uncertainty. Neither the source o...
We derive an equilibrium asset pricing model incorporating liquidity risk, derivative assets, and sh...
We derive an equilibrium asset pricing model incorporating liquidity risk, derivatives, and short-se...
Futures contracts on the New York Mercantile Exchange are the most liquid in-struments for trading c...
Asset pricing theory suggests that liquidity only affects prices if claims to the market portfolio d...
We develop a new asset pricing model with stochastic transaction costs and investors with heterogeno...
It is well established that investors price market liquidity risk. Yet, there exists no financial cl...
Evidence from the Credit Default Swap Market We derive a theoretical asset pricing model for derivat...
Deviations from no-arbitrage relations should be related to market liquidity, because liquidity faci...
While recent research has examined the asset pricing implications of systematic liquidity risk, a mo...
Futures contracts on the New York Mercantile Exchange are the most liquid instruments for trading cr...
This paper studies equilibrium asset pricing with liquidity risk the risk arising from unpredictabl...
We develop a model of the illiquidity transmission from spot to futures markets that formalizes the ...
This dissertation develops a model of the illiquidity transmission from spot to futures markets that...
Liquidity is one of the most intensively topics researched in financial economics for the last decad...
Derivatives markets can quickly become illiquid in periods of high uncertainty. Neither the source o...
We derive an equilibrium asset pricing model incorporating liquidity risk, derivative assets, and sh...
We derive an equilibrium asset pricing model incorporating liquidity risk, derivatives, and short-se...
Futures contracts on the New York Mercantile Exchange are the most liquid in-struments for trading c...
Asset pricing theory suggests that liquidity only affects prices if claims to the market portfolio d...
We develop a new asset pricing model with stochastic transaction costs and investors with heterogeno...
It is well established that investors price market liquidity risk. Yet, there exists no financial cl...
Evidence from the Credit Default Swap Market We derive a theoretical asset pricing model for derivat...
Deviations from no-arbitrage relations should be related to market liquidity, because liquidity faci...
While recent research has examined the asset pricing implications of systematic liquidity risk, a mo...
Futures contracts on the New York Mercantile Exchange are the most liquid instruments for trading cr...
This paper studies equilibrium asset pricing with liquidity risk the risk arising from unpredictabl...