Auswahl der wissenschaftlichen Literatur zum Thema „Illiquidity cost“

AbstractWe show that firms with more illiquid real assets have a higher cost of capital. This effect is stronger when real illiquidity arises from lower within-industry acquisition activity. Real asset illiquidity increases the cost of capital more for firms that face more competition, have less access to external capital, or are closer to default, and for those facing negative demand shocks. The effect of real asset illiquidity is distinct from that of firms’ stock illiquidity or systematic liquidity risk. These results suggest that real asset illiquidity reduces firms’ operating flexibility and through this channel their cost of capital.

The paper presents an alternative approach to measuring systemic illiquidity applicable to 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 the curve-fitting error as an indicator of financial system illiquidity. We empirically apply our method to a set of 10 divergent Central and Eastern Europe countries—Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, and Slovakia—in the period of 2006–2020. The results show three periods of increased risk in the sample period: the global financial crisis, the European public debt crisis, and the COVID-19 pandemic. They also allow us to identify three divergent sets of countries with different systemic liquidity risk characteristics. The analysis also illustrates the impact of the introduction of the euro on systemic illiquidity risk. The proposed methodology may be of consequence for financial system regulators and macroprudential bodies: it allows for contemporaneous monitoring of discussed risk at a minimal cost using well-known models and easily accessible data.

Research aims: Illiquidity risk is one of the complex issues that institutional investors and market participants continually face over time. It is because the constructs of illiquidity risk are sometimes complicated, robust, and not so evident in secondary markets. Hence, this study aims to empirically explore illiquidity risk before and during the COVID-19 pandemic to understand how much investors were expected to lose if they invested in stock markets during these periods.Design/Methodology/Approach: This study used a GARCH model and the Amihud illiquidity ratio to achieve its objective. Trading volumes and price returns for the JSE, CAC 40, DAX, Nasdaq, BIST 100, and SSE were from June 30, 2017, to June 30, 2019, and January 1, 2020, to December 31, 2021.Research findings: As expected, the findings revealed higher illiquidity risk during periods of financial distress, such as the COVID-19 pandemic. During the financial crisis, investors could lose up to $22268.44 a day in less developed markets, such as the JSE, while the average loss in developed markets ranged between $0.22 to $11.53 in the Nasdaq and DAX, respectively. On average, a much lower figure was observed before the financial crisis. The BIST100, CAC 40, DAX, and Nasdaq are excellent options for those seeking lower-risk premiums.Theoretical and Practitioner/Policy implication: Policies such as adequate market microstructure and greater transparency in trading are strongly recommended for less developed markets, especially during periods of financial distress. Also, the findings of this study provide valuable insight into short-term traders and market participants attracted to liquid markets, where they can easily enter and exit their positions with minimal transaction costs. To the author's knowledge, this paper is the first to model illiquidity risk in stock markets.Research limitation/Implication: It is possible that the current study did not accurately capture the cost of illiquidity in the sampled financial markets and cannot be applied to other financial markets.

We construct a model for liquidity risk and price impacts in a limit order book setting with depth, resilience and tightness. We derive a wealth equation and a characterization of illiquidity costs. We show that we can separate liquidity costs due to depth and resilience from those related to tightness, and obtain a reduced model in which proportional costs due to the bid-ask spread is removed. From this, we obtain conditions under which the model is arbitrage free. By considering the standard utility maximization problem, this also allows us to obtain a stochastic discount factor and an asset pricing formula which is consistent with empirical findings (e.g., Brennan and Subrahmanyam (1996); Amihud and Mendelson (1986)). Furthermore, we show that in limiting cases for some parameters of the model, we derive many existing liquidity models present in the arbitrage pricing literature, including Çetin et al. (2004) and Rogers and Singh (2010). This offers a classification of different types of liquidity costs in terms of the depth and resilience of prices.

Dans cette thèse, nous étudions plusieurs problèmes de mathématiques financières liés à la présence d’imperfections sur les marchés. Notre approche principale pour leur résolution est l’utilisation d’un cadre asymptotique pertinent dans lequel nous parvenons à obtenir des solutions approchées explicites pour les problèmes de contrôle associés. Dans la première partie de cette thèse, nous nous intéressons à l’évaluation et la couverture des options européennes. Nous considérons tout d’abord la problématique de l’optimisation des dates de rebalancement d’une couverture à temps discret en présence d’une tendance dans la dynamique du sous-jacent. Nous montrons que dans cette situation, il est possible de générer un rendement positif tout en couvrant l’option et nous décrivons une stratégie de rebalancement asymptotiquement optimale pour un critère de type moyenne-variance. Ensuite, nous proposons un cadre asymptotique pour la gestion des options européennes en présence de coûts de transaction proportionnels. En s’inspirant des travaux de Leland, nous développons une méthode alternative de construction de portefeuilles de réplication permettant de minimiser les erreurs de couverture. La seconde partie de ce manuscrit est dédiée à la question du suivi d’une cible stochastique. L’objectif de l’agent est de rester proche de cette cible tout en minimisant le coût de suivi. Dans une asymptotique de coûts petits, nous démontrons l’existence d’une borne inférieure pour la fonction valeur associée à ce problème d’optimisation. Cette borne est interprétée en terme du contrôle ergodique du mouvement brownien. Nous fournissons également de nombreux exemples pour lesquels la borne inférieure est explicite et atteinte par une stratégie que nous décrivons. Dans la dernière partie de cette thèse, nous considérons le problème de consommation et investissement en présence de taxes sur le rendement des capitaux. Nous obtenons tout d’abord un développement asymptotique de la fonction valeur associée que nous interprétons de manière probabiliste. Puis, dans le cas d’un marché avec changements de régime et pour un investisseur dont l’utilité est du type Epstein-Zin, nous résolvons explicitement le problème en décrivant une stratégie de consommation-investissement optimale. Enfin, nous étudions l’impact joint de coûts de transaction et de taxes sur le rendement des capitaux. Nous établissons dans ce cadre un système d’équations avec termes correcteurs permettant d’unifier les résultats de [ST13] et[CD13]
In this thesis, we study several mathematical finance problems related to the presence of market imperfections. Our main approach for solving them is to establish a relevant asymptotic framework in which explicit approximate solutions can be obtained for the associated control problems. In the first part of this thesis, we are interested in the pricing and hedging of European options. We first consider the question of determining the optimal rebalancing dates for a replicating portfolio in the presence of a drift in the underlying dynamics. We show that in this situation, it is possible to generate positive returns while hedging the option and describe a rebalancing strategy which is asymptotically optimal for a mean-variance type criterion. Then we propose an asymptotic framework for options risk management under proportional transaction costs. Inspired by Leland’s approach, we develop an alternative way to build hedging portfolios enabling us to minimize hedging errors. The second part of this manuscript is devoted to the issue of tracking a stochastic target. The agent aims at staying close to the target while minimizing tracking efforts. In a small costs asymptotics, we establish a lower bound for the value function associated to this optimization problem. This bound is interpreted in term of ergodic control of Brownian motion. We also provide numerous examples for which the lower bound is explicit and attained by a strategy that we describe. In the last part of this thesis, we focus on the problem of consumption-investment with capital gains taxes. We first obtain an asymptotic expansion for the associated value function that we interpret in a probabilistic way. Then, in the case of a market with regime-switching and for an investor with recursive utility of Epstein-Zin type, we solve the problem explicitly by providing a closed-form consumption-investment strategy. Finally, we study the joint impact of transaction costs and capital gains taxes. We provide a system of corrector equations which enables us to unify the results in [ST13] and [CD13]

Abstract The theories set forth in previous chapters provide a qualitative interpretation of cross-sectional and time variations in market liquidity. This chapter quantifies the contribution of each source of market illiquidity to these variations, using econometric techniques. Sections 5.2 and 5.3 explain how time series of transaction prices and signed trade sizes can be used to estimate the contributions of adverse selection costs, inventory costs, and order processing costs to market illiquidity and price movements. These techniques exploit the fact that market orders have different effects on the dynamics of securities prices depending on the relative prevalence of adverse selection, order processing, and inventory holding costs. Section 5.4 shows how order flow data can be used to build a measure of the prevalence of informed trading in a security. Armed with this gauge, one can test predictions about the effect of informed trading on liquidity and the sources of informed trading (e.g., whether some trading mechanisms are more prone to informed trading).

Recent years has seen the growth of the ‘shadow payment system’. This system includes Bitcoin exchanges, PayPal, Alipay in China, and mobile money services in Africa. On current projections, this global ‘shadow payment system’ will perform an ever-greater portion of payments in most economies in the world. This chapter explores what legal tools can be used to protect users’ funds stored within the shadow payment system. It provides a framework for identifying risks to users’ funds, the range of relevant legal tools and their effectiveness, and uses this framework to make three claims. First, insolvency of an actor in the shadow payment system exposes users’ funds to two risks. One is loss of value, which means the potential write-down of funds when users are characterized as unsecured creditors. The other is illiquidity, meaning users face a delay in converting or transferring funds during bankruptcy proceedings. Second, there is little information about legal tools currently used in the shadow payment system and their effectiveness. There is also little guidance on the desirability of using ex post tools, such as deposit insurance and lender of last resort, to protect users’ funds. This is because the policy community is yet to identify the benefits and costs of different roles for the shadow payment system in an economy. Is it an investment asset, alternative retail funds transfer system, vital payment infrastructure on which the economy relies, or something else? Third, mobile money can provide insights into discussions about using legal tools to protect users’ funds. This is because over the past ten years, this shadow payment system has become subject to increasingly sophisticated legal and regulatory regimes. A key insight from mobile money is ex ante and ex post tools appear required to address loss of value and illiquidity risks. A similar package of reforms may be needed to build strong, stable shadow payment systems in Japan, the United States, and other developed countries. The chapter uses mobile money in Malawi as a case study for developing this point.