| 讲座简介： | During the recent financial crisis, we have witnessed unprecedented compressions of asset prices. In a recent paper, Chen (2012) proposes a liquidity discount model that can successfully explain large price falls. In this article, we provide alternative valuations to the Chen model. Building on the same framework, we provide a new polynomial representation of the liquidity discount. We also simplify the Chen model to a closedform solution in a situation where there is no trading in the market place. We demonstrate in analytical forms that convexity in a security payoff is absolutely positively related to liquidity discounts. Finally, we contribute to the literature in relating the Chen model to trading volume (e.g. Karpoff (1986, 1987)). Using the price and trading volume data of the 9 largest financial
firms in the U.S., we find strong support of the Chen model. |
