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Estimation of Liquidity Cost in Financial Markets
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 Title & Authors
Estimation of Liquidity Cost in Financial Markets
Lim, Jo-Han; Lee, Ki-Seop; Song, Hyun-Seok;
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 Abstract
The liquidity risk is defined as an additional risk in the market due to the timing and size of a trade. A recent work by Cetin et ai. (2003) proposes a rigorous mathematical model incorporating this liquidity risk into the arbitrage pricing theory. A practical problem arising in a real market application is an estimation problem of a liquidity cost. In this paper, we propose to estimate the liquidity cost function in the context of Cetin et al. (2003) using the constrained least square (LS) method, and illustrate it by analyzing the Kellogg company data.
 Keywords
Constraint least square;liquidity cost;semi-parametric model;
 Language
English
 Cited by
1.
No Arbitrage Condition for Multi-Facor HJM Model under the Fractional Brownian Motion,;;

Communications for Statistical Applications and Methods, 2009. vol.16. 4, pp.639-645 crossref(new window)
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