A look-back option framework for bond illiquidity is extended to defaultable coupon bonds and used to estimate a 23-27 bps liquidity spread for an unquoted Republic of Italy bond.
Nave.Term structure estimation, liquidity-induced heteroskedasticity and the price of liquidity risk
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Defaultable bond liquidity spread estimation: an option-based approach
A look-back option framework for bond illiquidity is extended to defaultable coupon bonds and used to estimate a 23-27 bps liquidity spread for an unquoted Republic of Italy bond.