Market Liquidity Risk ― Implications for Asset Pricing, Risk Management, and Financial Regulation

Market Liquidity Risks provides is an accessible yet comprehensive guide to the critical tools needed to navigate liquidity markets and value security pricing in the presence of market frictions and information asymmetries.

The book begins with a brief historical overview of trading, liquidity, and financial markets before segueing into a look at major crises and how liquidity is affected by changing market dynamics. Van der Merwe builds on insights from microstructure theory to evaluate events of liquidity crises in light of the impact they have on the normal functioning of markets. She also presents a framework of liquidity adjusted pricing for fixed income and credit-related securities like credit default swaps. The book also showcases the interactions between liquidity and credit, as well as the relationship between liquidity in stable and unstable markets. To conclude, a blueprint if offered for dealing with future market liquidity issues in asset pricing and risk management.

Andria van der Merwe is a Senior Economist at Compass Lexecon where she specializes in financial economics applied to such issues as solvency analysis, valuation and damages, financial distress and financial crisis related litigation, and regulatory proceedings. She also has experience in quantitative finance and economic analysis applied to litigation, tax, and regulatory matters. Before joining Compass Lexecon in 2009, she was Director, Portfolio Management and Strategy, at the Federal Home Loan Bank of Chicago. She holds a PhD in Electrical Engineering from The Ohio State University, with concentrations in signal processing and applied mathematics. She is the holder of two US patents and has published numerous research papers in internationally renowned journals. She is an Adjunct Professor at Illinois Institute of Technology where she teaches graduate courses in Interest Rate and Credit Derivative Modeling.