Liquidity is the ability to trade a desired quantity of an asset at the market price. Liquidity has value: a given security with greater liquidity will have greater value than a less liquid, but otherwise identical security. The cost of liquidity is important because it is a major component of transaction costs. With recent increases … Read more
Barry A. Goss and Joost M.E. Pennings* PURPOSE: The universal desire by investors to economize on transactions costs has been heightened by the increased cost of liquidity, which has accompanied recent market turmoil. This proposal for an “Option on Liquidity” addresses the situation where an investor wishes to make a transaction of a given size … Read more
Barry A. Goss and Joost M.E. Pennings* PURPOSE: Many investors with positions in equities face price risks for both stocks and exchange rates, and frequently their decisions for these two assets are interdependent.This proposal takes this interdependence into account, for investors with risk management and/or speculation/arbitrage objectives. This product brings together two securities, namely a … Read more
