A0493
Title: Realized co-illiquidity
Authors: Eduardo Rossi - University of Pavia (Italy) [presenting]
Paolo Santucci de Magistris - LUISS University (Italy)
Orimar Sauri - Aarhus University (Mexico)
Angelo Ranaldo - University of Basel (Switzerland)
Abstract: The purpose is to examine market liquidity, with a focus on co-liquidity and illiquidity, which are crucial for both market participants and policymakers. It addresses the importance of extreme illiquidity events and their risks, particularly in high-frequency trading environments. Using high-frequency data on returns and volume, it builds on a simple structural model and a non-parametric approach inspired by a recent study, which links market volatility, volume, and liquidity. Liquidity measurement is refined by capturing price changes and trading volume dynamics, with a focus on illiquidity due to market frictions. It extends the framework to examine the temporal dynamics of co-(il)liquidity across various assets, providing new metrics to quantify liquidity contagion and systemic risks. This methodology bridges theory with empirical applications, offering practical tools for assessing and managing liquidity risks in diverse financial markets.
