Mathematics Colloquium Calendar

Upcoming Mathematics Colloquia

On Friday, February 2, Dr. Xiaoping Min, Associate Professor of Finance at the Jiangxi University of Finance and Economics, China, will present a colloquium on Liquidity Premium of Corporate Bonds Based on Merton Model. The talk will take place at 2:00 pm, in Room 205 of 7800 York Road

Abstract: Liquidity premium is an important factor to explain credit spread puzzle in corporate bond market. Assuming that bondholders in an imperfect liquidity market have to sell bond immediately at a fraction of the price in a perfect liquid, this paper constructs a corporate bond pricing model of imperfect liquidity market in the framework of Merton model. Monte Carlo simulation is used to analyze the liquidity premium of corporate bonds in the imperfect liquidity market. The contributions of this research are as follows. Firstly, this paper extends the Merton model and incorporates the dynamics of liquidity into the model to study the liquidity premia in the prices of corporate bonds. A liquidity stochastic process is constructed with the range of the fraction evolution being reasonably constrained. Secondly, liquidity level, liquidity risk, and liquidity elasticity are distinguished to discuss their individual impact on the pricing of corporate bonds. There is no analytic corporate bond pricing formula after introducing dynamic liquidity process; therefore, Monte Carlo simulation is used to analyze the liquidity premia. In Monte Carlo simulation, the long-term equilibrium with upper limit and lower limit of the liquidity process is used as a proxy of liquidity level; liquidity shock intensity and liquidity volatility of the liquidity process represent liquidity risk; and mean reversion speed of the liquidity process denotes liquidity elasticity. Thirdly, the relationship between the liquidity premium and the credit risk as well as the term structures of the liquidity premia are studied. The direct and indirect impact of the credit risk and bond term on the liquidity premia is explored.


Recent Mathematics Colloquium Talks

Date Topic Speaker
Dec 8, 2017 Site-specific recombination on circular DNA molecules and band surgery along the trefoil knot Dr. Allison H. Moore,
Dec 1, 2017 Promoting rough draft thinking to engage students in mathematics classroom discourse Dr. Amanda Jansen,
University of Delaware
Nov 10, 2017 Numerical algorithms of some multiphysics problems in incompressible fluid dynamics  Dr. Mingchao Cai
Morgan State University
Oct 27, 2017 An agile approach to data assimilation  Dr. Peter Horn, 
Oct 6, 2017 Rook and Wilf equivalence of integer partitions  Dr. Jonathan Bloom
Lafayette College
Sept 21, 2017 Counting integer points in polytopes with an extension of Presburger arithmetic  Dr. John Goodrick,
Los Andes University
Sept 14, 2017 Constructing nonstandard finite difference (NSFD) schemes for dynamical systems Seye Adekanye,
Howard University
Apr 27, 2017 Prediction methods for semi-continuous data with applications in climate science Dr. Nagaraj K. Neerchal, UMBC
Apr 18, 2017 Lyapunov rank in conic optimization Dr. Michael Orlitzky,
Apr 7, 2017 Managing default risk in affordable housing finance Dr. Tyler T. Yang,
IFE Group
Mar 9, 2017 Covariates-contributed sufficient dimension reduction Dr. Kofi Placid Adragni, UMBC
Nov 10, 2016 Dimensions of spline spaces and commutative algebra Dr. Michael DiPasquale,
Oklahoma State University
Oct 13, 2016 A lattice theorist's apology Dr. Jonathan Farley,
Morgan State University
Oct 6, 2016 The idea of dimension in model theory and discrete mathematics Dr. Cameron D. Hill, Wesleyan University
Sept 22, 2016 Jonathan Farley's mathematical terror theory: The structure of perfect terrorist cells with a single leader Ms. Zeinab Bandpey,
Morgan State University