Limit Order Book Dynamics and Asset Liquidity (Tienda española)

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“Liquidity, in the sense of asset liquidity, is an essential characteristic of a well working financial market. In fact, the absence of liquidity can influence the trading process considerably. The simple situation that an investor is not able to sell any given amount of assets at a given point of time can cause a financial distress even up to its insolvency. From this point of view, asset liquidity can be seen as the life elixir of financial markets.“

Georg Pristas presents in his thesis a new approach to measure asset liquidity based on the dynamical changes of the limit order book. He provides a substantial analysis of the model and verifies its measurement power. In addition he shows several aspects and uses of the concept.