Date: Wednesday, 8 January 2025, at 12.30pm (CET)

Dual format: ESSEC Paris La Défense (CNIT), Room TBA
and via Zoom, please click here

Market liquidity, defined as the ability to trade large quantities of assets quickly and at low cost, is vital for financial market efficiency. Beyond average liquidity levels, the risks of extreme illiquidity events, such as liquidity crashes, are of particular concern due to their potential to propagate across assets, causing illiquidity contagion. Liquidity significantly influences asset pricing, with direct effects on the cost of capital, firm productivity, and economic growth. Tail events, where liquidity evaporates, disrupt trading and amplify systemic risks. Theoretical and empirical studies highlight liquidity's role in financial contagion and its correlation across assets and markets. This paper develops a framework to measure co-liquidity using high-frequency data, combining structural and nonparametric approaches. Building on recent models, it proposes a nonparametric method inspired by Amihud (2002) to capture abrupt liquidity drops and their spillover effects.

Kind regards,
Jeremy Heng, Olga Klopp, Roberto Reno, Marie Kratz and Riada Djebbar (Singapore Actuarial Society - ERM)