A model that realistically defines market liquidity and depth is introduced. Liquidity is the expected rate of order execution in shares per minute. Depth is the average density of the limit order book in shares per dollar. Illiquid markets tend to exhibit longer execution delays and indirectly...

Purpose –This paper aims to enhance a co-skew-based risk measurement methodology initially introduced in Polimenis, by extending it for the joint estimation of the jump betas for two stocks. Design/methodology/approach –The authors introduce the possibility of idiosyncratic jumps and analyze...

We derive a simple relationship between the critical stock price and the gamma of the American put. We use this relationship to derive the correct expression for the critical stock price as time to maturity goes to zero and an analytic approximation for the in-the-money American put price. We...