This working paper surveys theoretical and empirical work about market liquidity and market liquidity risk. It addresses interested practitioners as well as students who want to gain a quick overview about the latest progress in research in market liquidity.

In this paper, we review the most common specifications of discrete-time stochastic volatility (SV) models and illustrate the major principles of corresponding Markov Chain Monte Carlo (MCMC) based statistical inference. We provide a hands-on ap proach which is easily implemented in empirical...