Technical paper/Liquidity
When do central counterparties enhance market stability?
This paper examines the impact of market structure and payment assumptions on the fragility of various networks.
The impact of de-tiering in the United Kingdom’s large-value payment system
The authors conduct a head-to-head comparison of central and bilateral clearing to evaluate the impact of market structure on market stability.
A model for the valuation of assets with liquidity risk
This paper describes a model for the valuation of assets on a bank balance sheet with liquidity risk. It applies the model to single cashflows, loans, bonds and derivatives. In addition, the calibration to London Interbank Offered Rate basis spreads is…
Haircutting non-cash collateral
Wujiang Lou develops a parametric haircut model to conduct sensitivity tests and capture market liquidity risk
Managing market liquidity risk in central counterparties
This paper discusses the different approaches to incorporating market liquidity risk within a CCP’s default waterfall and the challenges that these approaches pose.
Trading lightly: cross-impact and optimal portfolio execution
A liquidity model for basket of correlated securities is presented
Liquidity risk management implementation for selected Islamic banks in Pakistan
The purpose of this particular study is to determine if any liquidity risk exists in the Islamic banks of Pakistan and, if it does, what effect it has on the resilience of the industry in that country.
Fast and precautious: order controls for trade execution
Algo traders propose a new optimal execution algorithm with both limit and market orders
A network model for central counterparty liquidity risk stress testing under incomplete information
The authors put forth a realistic network model that maximizes the use of data available to a CCP in order to simulate credit default contagion.
Debt–liquidity shock risk: intertemporal effects and probability measures
This paper analyzes how the yield of government securities may be managed in order to save costs in the face of the risk of a liquidity shock.
Systemic risks in CCP networks
Barker, Dickinson, Lipton and Virmani propose a credit and liquidity risk model for CCPs
A map of collateral uses and flows
This paper provides insights into the increased demand for collateral, the reduced capacity for banks to act as collateral intermediaries and examples of risks and vulnerabilities in collateral flows.
Financial networks and bank liquidity
This papers is the first to link bank liquidity performance and core–periphery network structures.
The role of collateral in supporting liquidity
This paper focuses on the use of high-quality assets for collateral purposes.
Risk management for whales
Rama Cont and Lakshithe Wagalath introduce a liquidation-adjusted VAR
Identification of over and under provision of liquidity in real-time payment systems
The authors study the issue of liquidity provision in the context of payment systems where participating banks have flexibility on the timing of their outgoing payments during the settlement day.
Commodity premia: It’s all about risk control
Strategies based on commodity risk premia can be rewarding – but beware common pitfalls
Liquidity stress testing: a model for a portfolio of credit lines
This paper demonstrates how cash outflows due to credit lines can be modeled in a liquidity stress test.
An analytical value-at-risk approach for a credit portfolio with liquidity horizon and portfolio rebalancing
The authors provide a two-period analytical value-at-risk approach for credit portfolios with a liquidity horizon and a constant level of risk.
Cutting edge introduction: Hidden models for hidden costs
NYU quants use Bayesian techniques to sequence trades, considering trading costs and multiple assets
Quant ideas: Liquidity in commodity risk management
Liquidity plays a vastly underappreciated role in commodity markets