| Speaker: | Ren Raw Chen |
|---|---|
| Speaker Intro: |
Full professor at Fordham University,
Fields of Interests: Liquidity Quantification. Credit Derivatives. Equilibrium Option Pricing. Real Options. Mortgage Backed Securities. Term Structure of Interest Rates. |
| Host: | |
| Description： |
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 |
| Time: | 2015-06-05 16:40-18:00 |
| Venue: | N303, Econ Building |
| Organizer: | WISE-SOE |