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Bongaerts et al., 2011 - Google Patents

Derivative pricing with liquidity risk: Theory and evidence from the credit default swap market

Bongaerts et al., 2011

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Document ID
17046082890958179876
Author
Bongaerts D
De Jong F
Driessen J
Publication year
Publication venue
The Journal of Finance

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We derive an equilibrium asset pricing model incorporating liquidity risk, derivatives, and short‐selling due to hedging of nontraded risk. We show that illiquid assets can have lower expected returns if the short‐sellers have more wealth, lower risk aversion, or shorter …
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