paper at a conference: Bao, Pan & wang: "The Illiquidity of Corporate Bonds"I looked at the page 7 'Measuring Illiquidity' to understand approachThey assumed that log of the corporate bond price p ( t ) = f(t) + u(t)where f( t ) is price of the bond in absence of market friction which they interpret as costs and constrains for tradingand u(t) represents illiquidity component of the bond price. They defined the measure of illiquidity γ bygamma ( t ) = −Cov { p ( t ) - p ( t - 1 ) , p ( t + 1 ) - p ( t ) }The formal approach should be sound like following. We call bond B () perfectly liquid if its equation is .... this is equivalent to interpret perfect liquidity as ... Let p ( t ) follows some relationship then p( t ) admits representations = f(t) + u(t). The component u ( t ) we interpret as the price of illiquidity of the bond as far as f is already defined. The measure of illiquidity gamma ( t ) even for their construction does not transparent. For example if we can assume that p ( t ) has independent increments why say large gamma represents higher illiquidity and in general how it is related to liquidity while we do not have a simple definition of the liquidity. It is only first impression and the paper might has answers later or my questions somewhat irrelevant.

Just have read a section 1.4.4 'Liquidity Risk' Beiletcki and Rutkowski book 'Credit risk ... page 30 their point which in details coinsides with my point.

QuoteOriginally posted by: listJust have read a section 1.4.4 'Liquidity Risk' Beiletcki and Rutkowski book 'Credit risk ... page 30 their point which in details coinsides with my point.I don't have the book. What do they say on page 30?

QuoteOriginally posted by: crmorcomQuoteOriginally posted by: listJust have read a section 1.4.4 'Liquidity Risk' Beiletcki and Rutkowski book 'Credit risk ... page 30 their point which in details coinsides with my point.I don't have the book. What do they say on page 30?It is about 20 lines without formulas. I got this book online in pdf format and could not attached this section to the message text.I think you can try to get it yourself. The book is a good one to have.

Quote It is about 20 lines without formulas. That must have been a tough read for you.

QuoteOriginally posted by: daveangelQuote It is about 20 lines without formulas. That must have been a tough read for you.No you are not quite right it is written there is quite comprehensive.

1.4.4 'Liquidity Risk' Beiletcki and Rutkowski book 'Credit risk .. ' contains a reference on a paper of Francis A. Longstaff . Here is the reference http://www.anderson.ucla.edu/Documents/ ... Choice.pdf

QuoteOriginally posted by: listQuoteOriginally posted by: daveangelQuote It is about 20 lines without formulas. That must have been a tough read for you.No you are not quite right it is written there is quite comprehensive.That's good to know

QuoteOriginally posted by: daveangelQuoteOriginally posted by: listQuoteOriginally posted by: daveangelQuote It is about 20 lines without formulas. That must have been a tough read for you.No you are not quite right it is written there is quite comprehensive.That's good to knowIt is always pleasure to make a good for somebody in Saturday morning.But with your remark a question comes up to me. Bearing in mind your authority in this forums you might be answer if you will decide that it deserve to answer. When people roll a dice they understand that outcome can be 1-6 with a chance 1/6 regardless how many times we are going to roll the dice. In finance interpretation of the price notion is similar to say that rolling dice the price is 0. How much we lost in understanding price notion to its expectation?

How marketability affects security prices. see here: http://www.anderson.ucla.edu/documents/ ... e/2-95.pdf

Has anyone tried liquidity risk [LRSK] function of bloomberg?