Market Resilience

51 Pages Posted: 11 May 2018

See all articles by Jon Danielsson

Jon Danielsson

London School of Economics - Systemic Risk Centre

Efstathios Panayi

University College London - Financial Computing and Analytics Group, Department of Computer Science

Gareth Peters

Department of Actuarial Mathematics and Statistics, Heriot-Watt University; University College London - Department of Statistical Science; University of Oxford - Oxford-Man Institute of Quantitative Finance; London School of Economics & Political Science (LSE) - Systemic Risk Centre; University of New South Wales (UNSW) - Faculty of Science

Jean-Pierre Zigrand

London School of Economics - Department of Finance, Systemic Risk Centre, and Financial Markets Group

Date Written: April 27, 2018

Abstract

We propose a method to capture the notion of resilience, the dynamic aspect of liquidity in the limit order book, through the Threshold Exceedance Duration (TED) metric that we introduce. This measures the duration of liquidity 'droughts.' We illustrate the explanatory power of a survival regression framework for the duration of ‘droughts' in terms of observable state variables reflecting the shape and evolution of the limit order book using Chi-X data. Finally, we introduce a method to summarise exceedance duration information across different thresholds, called Liquidity Resilience Profile, which enables the comparison and the ranking of liquidity resilience.

Keywords: Liquidity Measures, Resilience, Limit Order Book, Liquidity Provision, Optimal Trade Execution

JEL Classification: G14, G12, C41, C57, D44

Suggested Citation

Danielsson, Jon and Panayi, Efstathios and Peters, Gareth and Zigrand, Jean-Pierre, Market Resilience (April 27, 2018). Available at SSRN: https://ssrn.com/abstract=3169755 or http://dx.doi.org/10.2139/ssrn.3169755

Jon Danielsson

London School of Economics - Systemic Risk Centre ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44.207.955.6056 (Phone)

HOME PAGE: http://www.riskreasearch.org

Efstathios Panayi

University College London - Financial Computing and Analytics Group, Department of Computer Science ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Gareth Peters

Department of Actuarial Mathematics and Statistics, Heriot-Watt University ( email )

Edinburgh Campus
Edinburgh, EH14 4AS
United Kingdom

HOME PAGE: http://garethpeters78.wixsite.com/garethwpeters

University College London - Department of Statistical Science ( email )

1-19 Torrington Place
London, WC1 7HB
United Kingdom

University of Oxford - Oxford-Man Institute of Quantitative Finance ( email )

University of Oxford Eagle House
Walton Well Road
Oxford, OX2 6ED
United Kingdom

London School of Economics & Political Science (LSE) - Systemic Risk Centre ( email )

Houghton St
London
United Kingdom

University of New South Wales (UNSW) - Faculty of Science ( email )

Australia

Jean-Pierre Zigrand (Contact Author)

London School of Economics - Department of Finance, Systemic Risk Centre, and Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6201 (Phone)
+44 20 7955 7420 (Fax)

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