Market Liquidity

This work empirically examines six structural models of the term structure of credit risk spreads: Merton (1974), Longstaff & Schwartz (1995) (with and without stochastic interest rates), Leland & Toft (1996), Collin-Dufresne & Goldstein (2001), and a constant elasticity of variance model. The conventional approach to testing structural models has involved the use of observable data to proxy the latent capital structure process, which may introduce additional specification error. This study extends Jones, Mason & Rosenfeld (1983) and Eom, Helwege & Huang (2004) by using implicit estimation of key model parameters resulting in an improved level of model fit. Unlike prior studies, the models are fitted from the observed dynamic term structure of firm-specific credit spreads, thereby providing a pure test of model specification. The models are implemented by adapting the method of Duffee (1999) to structural credit models, thereby treating the capital structure process is truly latent,...

This study investigates empirically the effects that hedge funds can have on the stability of the financial system. We conclude that hedge funds are in general less risky than banks. We do not find much evidence for the fear that hedge fund failures can trigger a systemic crisis in the banking sector. The main risk resides in hedge fund failures that may bring down a bank and thereby indirectly also endanger the stability of other banks and the payment system. If the hedge fund industry is to be regulated further, it should be for this reason.

The international financial crises is also an illiquidity of securities and financial markets crises. This has given rise to market liquidity risk that is something different and more than «pure market risk» that asks financial intermediaries to be properly measured and managed. In this perspective, the paper aims: a) to compare the Liquidity Adjusted VaR methodologies and b) to apply the Meucci model's on equity securities portfolio to measure the market liquidity risk and pure market risk in the presence of different levels of diversification, liquidity strategies, market's periods

               Financial distress starts from the company's inability to fulfill its obligations. Companies that have consecutively decreased, the company was in financial distress before the bankruptcy occurred.The purpose of this study was to determine the effect of profitability ratios, activity ratios and leverage ratios on financial distress in property and real estate sub-sector service companies listed on the Indonesia Stock Exchange (BEI).The research method used is a quantitative method with descriptive and verification approaches, quantitative research methods are research methods used to examine a particular population or sample. Descriptive research method is used to determine the value of the independent variable, while verification is used to determine the effect of two or more variables.The results showed the average value of each variable as follows: Financial Distress 4.52, Profitability Ratio 0.07, and Activity Ratio 17.13, Leverage Ratio 52.76. The results of ...

The importance of financial management as a vital aspect of the company should be considered and managed properly if the company remains to maintain the sustainable business. Development of an early warning system model is needed to anticipate the financial distress, because this model can identify and improve the condition prior to the crisis. This research aims to examine the liquidity (CR, QR), profitability (ROI, ROE), leverage (DER, DAR), the effect of financial distress. The sample used in this research is the company's transportation, infrastructure and utilities sector in Indonesia Stock Exchange (BEI) for the period year 2012-2016. This research uses purposive sampling, which obtained 171 samples of observations from 39 companies. The hypothesis is examined by using regression logistic. The result shows that the ratio of ROI havesignificant effect on the company’s financial distress. While the CR, QR, ROE DER and DAR have no effect on the company’s financial distress. A...

Multimarket Trading and Market Liquidity Bhagwan Chowdhry University of California at Los Angeles Vikram Nanda University of Southern California Wben a security trades at multiple locations simul-taneously, an informed trader bos several avenues in which to exploit bis private ...

The study examines the effect of liquidity management on the performance of DMBs in Nigeria. The objective of the study is to determine the extent of relationship that exists between liquidity mechanism and DMBs performance in Nigeria from 2000 to 2015. The study employs Augmented Dickey Fuller Unit Root Test, OLS regression and Granger Causality. The result of the study revealed that liquidity mechanism is not significantly related to DMBs performance in the short run and long run. The granger result proves that liquidity mechanism hinders DMBs performance within the period under review in the study. Hence, the study recommends that DMBs should be given leverage of plugging back funds into investment to booster profitability while maintaining a level of liquidity ratio.

The paper deals with relationship between liquidity and profitability ratios in the Czech Republic to investigate whether there exists correlation (a) within selected liquidity ratios and (b) selected liquidity ratios and selected profitability ratio in the Czech Republic during the period 2003-2013. Empirical data from Bureau van Dijk, Amadeus database were analysed from the point of both time-series and cross-sectional analysis. The main findings of the paper are that correlation within selected liquidity ratios is fairly strong while correlation between selected liquidity ratios and selected profitability ratio is relatively weak.

Customer order flow – signed transaction volume between market makers and their customers – is a key concept in the microstructure approach to exchange rates. We attempt to explore what the data tells us about the role of customer order flow in the market for Hungarian forint, using the standard analytical framework of the FX microstructure literature. Our results confirm that customer order flow helps to explain exchange rate fluctuations, which suggests that customer order flow is a key source of information for the market makers. We also find that domestic and foreign customers play significantly different roles on the euro/Hungarian forint market: foreign players' order flow seems to provide the information that drives exchange rate fluctuations, whereas domestic customers are the source of market liquidity. We present evidence suggesting that current order flow from customers is able to provide a significantly better ‘forecast’ for the the exchange rate than the random walk...

The objectives of this research are to investigate the effect of liquidity on profitability and also the directions of causality between liquidity and profitability of Islamic banks in the United Kingdom. Five Islamic banks out of the existing twenty Islamic banks were selected for the study. They are Al Rayan Bank, Bank of London and Middle East, European Islamic Investment Bank, Gatehouse Bank and Qatar Islamic Bank.  Econometrics analysis which include; regression and Granger causality test were carried out on UK Islamic banks’ liquidity and profitability. The results of the regression analysis showed that there exists co-integration among the variables, that is, long run relationship exists and also liquidity negatively and significantly affects profitability of the Islamic banks in the United Kingdom both in the short and long runs. However, the result of the pairwise granger causality test showed that there is no unidirectional or bidirectional causal effect between liquidity ...

Profit growth was important information for investors and company itself to make the right decisions. The objective of this research is to examine empirical evidence about solvability ratio, activity ratio, liquidity ratio, and book tax differences towards profit growth. The objects in this research are retail and manufacturing companies listed at Indonesian Stock Exchange for the period 2014-2015. The data used in this research was secondary data collected from financial statements at Indonesian Stock Exchange. The samples were selected using purposive sampling method. The data analysis technique used in this research is multiple regression. The results of this research showed that book tax differences proxied by permanent differences has significant effect towards profit growth. Then solvability ratio proxied by debt to total asset and debt to equity ratio have no significant effect towards profit gowth. Activity ratio proxied by inventory turnover, liquidity ratio proxied by curr...

Multimarket Trading and Market Liquidity Bhagwan Chowdhry University of California at Los Angeles Vikram Nanda University of Southern California Wben a security trades at multiple locations simul-taneously, an informed trader bos several avenues in which to exploit bis private ...

Purpose. Significant capital inflows in the cryptocurrency market and record-breaking prices on cryptocurrency assets have led to the creation of alternative investment options on cryptocurrency markets, including a new field of decentralized investing, known as decentralized finance, operating on smart contracts. The objective of this study is to review investment options in the industry sector available to investors on cryptocurrency markets and decentralized protocols. Methodology. The model of decentralized cryptocurrency exchanges was used in the article. It is based on providing liquidity into the liquidity pool. Findings. The results of this study demonstrate that new industrial cryptocurrency investors have a wide range of investment options that can outperform strategies like passive holding of cryptocurrency or investing in the stock. Given the liquidity mining model attracts early investors, they need to look at assets such as governance tokens of different platforms. The...

Tujuan dari penelitian ini adalah untuk mengetahui pengaruh dari Profitabiitas, Free Cash Flow, Leverage, Likuiditas, dan Size terhadap Dividen Payout Ratio pada perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia (BEI). Populasi dari penelitian ini adalah perusahaan manufaktur yang terdaftar di Bursa Efek Indonesia (BEI) pada tahun 2011-2015. Sampel dipilih dengan menggunakan metode purposive sampling, sebanyak 105 data dalam 5 tahun penelitian. Penelitian ini menggunakan model analisis berganda dalam pengujian hipotesis. Hasil penelitian menunjukkan bahwa profitabilitas berpengaruh positif terhadap Dividen Payout Ratio dan Free Cash Flow berpengaruh negatif terhadap Dividen Payout Ratio perusahaan. Sedangkan variabel leverage, Likuiditas dan Size tidak berpengaruh terhadap Dividen Payout Ratio

This paper aims to identify Islamic Sukuk, their issuance basis, the latest developments of this instrument in the global market, and to identify Sukuk’s ability to resolve liquidity problems. In addition to some difficulties that confront the Islamic financial system. Also, this paper shows how Sukuk role in supporting the Islamic banking industry and solving some financial crises by analyzing some indicators. Keywords : Islamic banks, Sukuk, excessive liquidity, and banking system in Jordan.

Notwithstanding the substantial benefits of local currency bonds, it is useful to consider potential risks that may arise from the rapid development of such instruments. Such risks may initially be hidden but should not be underestimated. An important issue to consider is whether the replacement of long-term foreign currency borrowing with shorter-term borrowing has not simply replaced currency risk with

Using data from the credit default swap (CDS), corporate bond, and equity markets, we construct several measures of liquidity and examine the spill-over of liquidity shocks across these markets. Based on the principal component analysis of multiple liquidity measures, we show that there is a dominant first principal component in each of the markets. However, the linkage of liquidity shocks varies between different markets. In particular, there is a common component between the equity and both CDS and bond markets, but not between the CDS and bond market. Moreover, the vector autoregression results show that while there is spill-over of liquidity shocks between equity and CDS markets, surprisingly there is no clear spill-over of liquidity shocks between equity and bond markets. There appears to be a time lag of liquidity spill-over from the CDS to both bond and equity markets. Finally, we find no evidence of liquidity spill-over from bond to CDS market. Key Words: Liquidity shock; Co...

This work empirically examines six structural models of the term structure of credit risk spreads: Merton (1974), Longstaff & Schwartz (1995) (with and without stochastic interest rates), Leland & Toft (1996), Collin-Dufresne & Goldstein (2001), and a constant elasticity of variance model. The conventional approach to testing structural models has involved the use of observable data to proxy the latent capital structure process, which may introduce additional specification error. This study extends Jones, Mason & Rosenfeld (1983) and Eom, Helwege & Huang (2004) by using implicit estimation of key model parameters resulting in an improved level of model fit. Unlike prior studies, the models are fitted from the observed dynamic term structure of firm-specific credit spreads, thereby providing a pure test of model specification. The models are implemented by adapting the method of Duffee (1999) to structural credit models, thereby treating the capital structure process is truly latent,...