Measuring financial market liquidity

Will Kerry
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Will Kerry: Deputy Division Chief of the Monetary and Capital Markets Department, International Monetary Fund, USA

Journal of Risk Management in Financial Institutions, 2008, vol. 1, issue 2, 181-190

Abstract: This paper introduces a new composite indicator of market liquidity, based on a series of measures developed in the academic literature. The indicator suggests that financial market liquidity was markedly lower in the summer of 2007, following a period of high liquidity. The indicator shows that market liquidity can fall rapidly in times of stress, highlighting the importance of managing this source of risk in the financial system. The views expressed in this paper are those of the author and not necessarily those of the Bank of England.

Keywords: liquidity; liquidity risk; liquidity premium; bid-ask spreads; risk management (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2008:v:1:i:2:p:181-190

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