Option Pricing in the Presence of Liquidity Risk: The Impact of Liquidity Risk in Option Pricing Theory with a Supply Curve - Image 1

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VDM Verlag Option Pricing in the Presence of Liquidity Risk: The Impact of Liquidity Risk in Option Pricing Theory with a Supply Curve

Name: Option Pricing in the Presence of Liquidity Risk: The Impact of Liquidity Risk in Option Pricing Theory with a Supply Curve
Brand: VDM Verlag
Price: 43.0 GBP
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Economics

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Description

Liquidity risk is always present in our financial system and has in the last years been a major contribution to the financial crisis. Market liquidity risk has an effect on for example security prices, risk management, and the speed of arbitrage. The banks and their funding liquidity drives the market liquidity risk. Liquidity crisis arises through losses, increasing margins, tightened risk management, and increased volatility. When this happens the traditional liquidity providers becomes liquidity demanders which affect prices in a negative way. To get a sound understanding of liquidity risk we have to specify and describe liquidity. Market liquidity and funding liquidity are two kinds of liquidity. Market liquidity can be described as good when a security is easy to trade. Easy to trade is defined as small bid ask spread, small price impact and high resilience. If a bank or investor have good funding liquidity they have good availability of funds by their own capital or from loans. The main objective in this paper is to show if liquidity risk has a significant impact on option price and depends on a real supply curve.

Product Specifications

Brand: VDM Verlag
Format: paperback
ASIN: 3639358058
Category: Books > Subjects > Business, Finance & Law > Economics
Domain: Amazon UK
Release Date: 20 May 2011
Listed Since: 24 May 2011

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VDM Verlag Option Pricing in the Presence of Liquidity Risk: The Impact of Liquidity Risk in Option Pricing Theory with a Supply Curve

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VDM Verlag Option Pricing in the Presence of Liquidity Risk: The Impact of Liquidity Risk in Option Pricing Theory with a Supply Curve

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Price Analysis

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