Mathematics - Lecture/Discussion
Thursday, October 20, 2005
4:00 PM-5:00 PM
Speaker: Marcel Blais (WPI)
Abstract: Recently Cetin, Jarrow, and Protter have proposed an extension of the usual models for asset prices, which incorporates liquidity. To do this they have postulated the existence of a supply curve, which gives the instantaneous liquidity levels at every time and price. This allows for an analysis of stock prices incorporating liquidity. Using data from Morgan Stanley we can estimate the postulated supply curve quite precisely. Using statistical analysis we can show such a supply curve does in fact exist, and we can show how it changes over time. Findings show that the supply curve behavior for liquid stocks is linear, with a slope close to zero, although different from zero, and for illiquid stocks is non-linear. We use this model to develop different ways to measure liquidity, and investigate how this affects option pricing.
Refreshments will be served.
Suggested Audiences: Adult, College
E-mail:
ma-chair@wpi.edu
Last Modified: October 18, 2005 at 8:32 AM
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