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Corporate bond liquidity and matrix pricing

✍ Scribed by Yusho Kagraoka

Publisher
Elsevier Science
Year
2005
Tongue
English
Weight
186 KB
Volume
355
Category
Article
ISSN
0378-4371

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✦ Synopsis

Matrix priced bond price data are investigated to model the liquidity of a corporate bond. Preliminary study shows that the yield spread is wide when a yield history records jumps. As well as respecting the way how matrix prices are generated, this finding leads us to a conjecture that time series of yield is represented by a jump-diffusion process. Then the kurtosis of a yield distribution can be regarded as a proxy variable for the liquidity. The conjecture is empirically validiated by regression analysis of yield spreads.

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