The importance of maintaining sufficient liquidity in financial markets is emphasised strongly in the academic literature. During the 1990s the United Kingdom monetary authorities introduced a number of structural reforms in the government bond market, aimed at improving secondary market...

Financial market liquidity is an important yardstick of value for investors and central monetary authorities. Secondary market liquidity itself cannot be observed directly and is instead measured using a number of different proxies. The most common proxy is the asset bid-off price spread. In...