Assessing the Risk of Liquidity Suppliers on the Basis of Excess Demand Intensities

Posted: 29 Feb 2008

See all articles by Nikolaus Hautsch

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research; Center for Financial Studies (CFS); Vienna Graduate School of Finance (VGSF)

Abstract

In this article we introduce the concept of excess volume durations, which are defined as the time until a given amount of buy or sell excess volume is traded on the market. Excess volume durations indicate the one-sided intensity of liquidity demand and characterize the risk of a market maker with respect to asymmetric information and inventory problems. By modeling excess volume durations based on Box-Cox-type autoregressive conditional duration (ACD) models, it is shown that market microstructure variables are predictors for the expected liquidity demand intensity. Moreover, the length of excess volume durations is found to be positively correlated with the magnitude of the corresponding price impact and thus the market depth.

Suggested Citation

Hautsch, Nikolaus, Assessing the Risk of Liquidity Suppliers on the Basis of Excess Demand Intensities. Journal of Financial Econometrics, Vol. 1, pp. 189-215, 2003. Available at SSRN: https://ssrn.com/abstract=821701

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Center for Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Register to save articles to
your library

Register

Paper statistics

Abstract Views
489
PlumX Metrics