RT Journal Article
SR Electronic
T1 The Value of Liquidity
JF The Journal of Trading
FD Institutional Investor Journals
SP 10
OP 15
DO 10.3905/JOT.2010.5.1.010
VO 5
IS 1
A1 Chris Sparrow
A1 Denis Ilijanic
YR 2009
UL https://pm-research.com/content/5/1/10.abstract
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