ILLIX - A New Index for Quantifying Illiquidity

Illiquidity is a major issue in today’s risk management, yet there exists no straight-forward quantification of liquidity or illiquidity. We present eight possible measures of liquidity which are partially based on micro-structural market data and examine their evolution over time in the context of the development of financial markets. These eight measures are used for creating the new illiquidity index ILLIX. We outline the calculation of this index and show that it can describe well the liquidity situation in the North American market over the period between 1998 and 2009.