We obtain new closed-form pricing formulas for contingent claims when the asset follows a Dupire-type local volatility model. To obtain the formulas we use the Dyson-Taylor commutator method recently developed in [7, 8, 10] for short time asymptotic expansions of heat kernels, and obtain a...

I propose a friction measure of bond round-trip liquidity costs that is robust to outliers and accounts for the idiosyncratic information behind trading decisions. Particularly effective with investment-grade bonds, the proposed measure displays properties consistent with the credit risk puzzle....