Derivatives and Market Liquidity

Timely research on two crucial investment topics

This research brings together theoretical and actionable insights on two interconnected topics at the very heart of financial markets: liquidity and derivatives. Investors can read about using put options to create an efficient tail risk hedging strategy, explore the first study on “0DTE” options, and get the latest in-depth analysis of central bank liquidity tools.

Video: Why Liquidity Matters | Michael Howell (Real Vision)

Michael Howell, CEO of CrossBorder Capital, explains the crucial role of liquidity in driving and supporting markets: more liquidity, higher prices; less liquidity, lower prices.

Tail Risk Hedging: The Search for Cheap Options

This paper shows how put options can be used in developing a robust tail risk hedge for an institutional portfolio.

ECB Euro Liquidity Lines (IMF)

Central bank swap and repo lines – from the Fed and the ECB – have been used extensively in the last two decades to provide foreign currency liquidity across jurisdictions.

Retail Traders Love 0DTE Options... But Should They? (University of Münster)

This is the first study investigating the implications of trading in options that expire on the same day, also known as "0DTE" options.

Helicopter Drops and Liquidity Traps (FRBM)

The FRBM shows that helicopter drops of money can be effective during a liquidity trap period, as opposed to more traditional measures of injecting purchasing power.

Progress on Global Transition to RFRs in Derivatives Markets (ISDA)

Trading activity in risk free rate (RFR)-linked derivatives increased significantly in 2022, and has continued to do so in the first half of 2023.

Clearing for the Repo Market: The Next Chapter (LCH)

The current market uncertainty, and the state of the global economy more broadly, has reinforced the need for repo clearing by a greater number of market participants.

Italian Banks: Funding and Liquidity (Scope Ratings)

European banks remain in dire need of funding. This paper focuses on Italian banks, analysing their funding and liquidity needs in light of recent market developments.

Interest Rate Derivatives Trading Activity in EU, UK and US Markets (ISDA)

This report sheds light on the sometimes opaque interest rate derivatives markets across the EU, UK and U.S., providing investors with key data on this topic.