Liquidity Risk Factors for Bonds

22 Pages Posted: 16 Aug 2009

See all articles by Giampaolo Gabbi

Giampaolo Gabbi

SDA Bocconi School of Management

Bastianina Salis

Allianz S.p.A, Milan

Date Written: August 14, 2009

Abstract

The main purpose of the paper is to define a model to estimate the liquidity risk for bonds, since very frequently their volatility price is lower than what appears after some shocks. The expected output will be generated comparing qualitative and quantitative methodologies, such as bond portfolio managers and statistical analysis.

The explaining variables for bond liquidity risk are: currency, exchange, issue date, maturity, coupon type, coupon, duration, yield, rating Moody, rating S&P, default, outstanding, and, finally, the existence of some options.

The main factors which lead to the estimation of liquidity risk are whether the bonds are listed, the default of the bond and maturity.

The fitting of the model is measured comparing theoretical outcomes with the qualitative indications of some senior portfolio managers.

Keywords: Liquidity risk, corporate bond, discriminant analysis, logit

JEL Classification: G11, G12

Suggested Citation

Gabbi, Giampaolo and Salis, Bastianina, Liquidity Risk Factors for Bonds (August 14, 2009). Available at SSRN: https://ssrn.com/abstract=1452693 or http://dx.doi.org/10.2139/ssrn.1452693

Giampaolo Gabbi (Contact Author)

SDA Bocconi School of Management ( email )

Via Bocconi 8
Milan, Milan 20136
Italy

Bastianina Salis

Allianz S.p.A, Milan ( email )

Milan
Italy

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