PT  - JOURNAL ARTICLE
AU  - Chris Sparrow
AU  - Denis Ilijanic
TI  - The Value of Liquidity
AID  - 10.3905/JOT.2010.5.1.010
DP  - 2009 Dec 31
TA  - The Journal of Trading
PG  - 10--15
VI  - 5
IP  - 1
4099  - https://pm-research.com/content/5/1/10.short
4100  - https://pm-research.com/content/5/1/10.full
AB  - This article presents a framework for quantifying the value of liquidity. The authors suggest that liquidity is valuable from both cost and risk perspectives. The value of liquidity from a cost perspective may be quantified by using a cost model to compare an estimate of the market impact expected by executing an alternative trading strategy with the market impact of interacting with unexpected liquidity. The value of liquidity from a risk perspective may be quantified by using a risk model to compare the risk exposure expected to be incurred by executing an alternative trading strategy with the risk exposure expected to be incurred by interacting with unexpected liquidity.TOPICS: Exchanges/markets/clearinghouses, big data/machine learning