Liquidity Commonality in Commodities

Marshall, Ben R.; Nguyen, Nhut H.; Visaltanachoti, Nuttawat

doi:10.2139/ssrn.1603705

Cited by 29 publications

(31 citation statements)

References 32 publications

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“…Frino, Mollica, and Webb (2014) and Webb, Ryu, Ryu, and Han (2016) show that the liquidity risk of futures contracts is driven by various factors including traders' knowledge and colocation of their servers. Moreover, Marshall, Nguyen, and Visa ltanachoti (2013) provide evidence for the existence of a distinct and common liquidity risk factor in the commodity market and that this liquidity risk factor is closely related to the underlying commodity price. Moreover, Marshall, Nguyen, and Visa ltanachoti (2013) provide evidence for the existence of a distinct and common liquidity risk factor in the commodity market and that this liquidity risk factor is closely related to the underlying commodity price.…”

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confidence: 89%

Derivatives pricing with liquidity risk

Zhang

Ding

Duygun

2019

Journal of Futures Markets

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This paper develops a novel, general derivative pricing model which introduces a liquidity risk factor. The model variants we outline offer a sufficient degree of flexibility so as to enable the valuation of various types of derivative classes including futures, American options, and mortgage backed security options, whereas existing derivative models can only price liquidity risk in European derivatives. We validate the model with oil and gold futures data and compare it to a classical benchmark model void of any liquidity risk. We find that our model is significantly more accurate than the classical model for pricing both oil and gold contracts.

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confidence: 89%

Derivatives pricing with liquidity risk

Zhang

Ding

Duygun

2019

Journal of Futures Markets

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“…They were also employed to assess liquidity in the U.S. commodity markets by [32]- [34], and in the Nordic power market by [35].…”

Section: Measures Of Spreadmentioning

confidence: 99%

Liquidity in the NBP forward market

Russo

Menezes

Urga

2016

2016 13th International Conference on the European Energy Market (EEM)

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Abstract-Liquidity in the National Balancing Point (NBP) forward market during 2010-14 is examined using liquidity measures adopted from the financial literature. Since the sample period includes the date when the EU Regulation on Market Integrity and Transparency (REMIT) became in force, the question of whether changes in these measures reflect REMIT is also investigated. There is evidence of increased market transparency and competition, which are of interest to policy makers and regulators. No significant differences in the level of liquidity in the NBP one-month-ahead market appear to have followed the introduction of REMIT. Permanent

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“…They show that their liquidity measures of bid‐ask spreads, volume, and price impact of an individual option co‐move with market‐wide option liquidity and underlying stock liquidity. Marshall, Nguyen, and Visaltanachoti () conversely investigate 16 commodity futures that form part of S&P Goldman Sachs' Commodity Index and find support for commonality in liquidity amongst US futures markets; however, they find no evidence of a consistent link between stock and commodity futures liquidity in general.…”

Section: Literature Reviewmentioning

confidence: 99%

Commonality in Liquidity Across International Borders: Evidence from Futures Markets

Frino

Mollica

Zhou

2014

Journal of Futures Markets

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This study examines commonality in liquidity for stock index futures markets. We report strong evidence of commonality in global liquidity for nine index futures contracts over a 10-year time period extending October 2002 to September 2012. Our results are robust to expiry effects and tests for liquidity commonality based on a market model and principal component method. We investigate the variation in global liquidity commonality through time and document that liquidity commonality is higher in significance and more pervasive in recent years.

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Liquidity Commonality in Commodities

Cited by 29 publications

References 32 publications

Derivatives pricing with liquidity risk

Derivatives pricing with liquidity risk

Liquidity in the NBP forward market

Commonality in Liquidity Across International Borders: Evidence from Futures Markets

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