Thermodynamic Analysis of Financial Markets: Measuring Order Book Dynamics with Temperature and Entropy

This study bridges finance and physics by applying thermodynamic concepts to model the limit order book (LOB) with high-frequency trading data on the Bitcoin spot. We derive the measures of Market Temperature and Market Entropy from the kinetic and potential energies in the LOB to provide a deeper understanding of order activities and market participant behavior. Market Temperature emerges as a robust indicator of market liquidity, correlating with liquidity measures such as Active Quote Volume, bid-ask spread and match volume. Market Entropy, on the other hand, quantifies the degree of disorder or randomness in the LOB, providing insights into the instantaneous volatility of price in the high-frequency trading market. Our empirical findings not only broaden the theoretical framework of econophysics but also enhance comprehensive understanding of the market microstructure and order book dynamics.

The Asymmetric Impact of COVID-19: A Novel Approach to Quantifying Financial Distress across Industries

This paper assesses corporate financial distress in terms of liquidity and risk of insolvency due to the COVID-19 pandemic. We develop a novel multivariate approach to obtain monthly data on industry turnover, exploiting real time data to capture the atypical character of industry-specific disturbances. By combining the estimated set of industry revenue shocks with pre-pandemic financial statements, we quantify the impact of the pandemic on the risk of insolvency in the EU non-financial corporate sector. Our definition of risk of insolvency takes into account not only the equity position of firms, but also risks relating to overindebtedness. The analysis controls for firms that were financially vulnerable already before the pandemic, thus being prone to become at risk of insolvency also in absence of the COVID-19 turmoil. We find that, for the EU as a whole, 25% of firms exhausted their liquidity buffers by the end of 2021 (a practical cut-off date of the analysis, not an assumed end of the pandemic). Furthermore, 10% of firms which were viable before the pandemic, appear to have shifted into risk of insolvency as a result of the COVID-19 crisis. The magnification of financial vulnerability in the hardest-hit industries mainly occurs among firms with no legacy issues, i.e. firms with positive profitability pre-pandemic. A similar finding is reported for some of the hardest-hit countries, such as Italy and Spain. In other countries, such as Germany or Greece, the magnification of financial vulnerability mainly occurs among firms with negative profitability pre-pandemic.

Sodium ion influx regulates liquidity of biomolecular condensates in hyperosmotic stress response

Biomolecular condensates are membraneless structures formed through phase separation. Recent studies have demonstrated that the material properties of biomolecular condensates are crucial for their biological functions and pathogenicity. However, the phase maintenance of biomolecular condensates in cells remains elusive. Here, we show that sodium ion (Na+) influx regulates the condensate liquidity under hyperosmotic stress. ASK3 condensates have higher fluidity at the high intracellular Na+ concentration derived from extracellular hyperosmotic solution. Moreover, we identified TRPM4 as a cation channel that allows Na+ influx under hyperosmotic stress. TRPM4 inhibition causes the liquid-to-solid phase transition of ASK3 condensates, leading to impairment of the ASK3 osmoresponse. In addition to ASK3 condensates, intracellular Na+ widely regulates the condensate liquidity and aggregate formation of biomolecules, including DCP1A, TAZ, and polyQ-protein, under hyperosmotic stress. Our findings demonstrate that changes in Na+ contribute to the cellular stress response via liquidity maintenance of biomolecular condensates.

Financial risk and resiliency on US dairy farms: Measures, thresholds, and management implications

Given the revenue and cost volatility with resulting tight profit margins in dairy farming, it is increasingly important to measure, monitor, and understand farm financial risk. Solvency, liquidity, debt repayment capacity, and financial efficiency measures can reveal potential problem areas and assist in financial risk management. Financial risk is defined as uncertainty about interest rates, willingness of lender to keep or put money into the business, ability to meet cash flow needs, and the market value of collateral. Financial resilience is defined as the ability to withstand events that impact firm net income. Solvency was measured by equity to asset ratio. Liquidity was measured by current ratio. Repayment capacity was measured by debt coverage ratio. Financial efficiency was measured by operational expense ratio and net farm income ratio. Critical thresholds for these farm financial measures include those determined by US agricultural lenders since maintaining access to outside capital is important for farm financial management. To demonstrate these concepts and measure financial risk and resilience, this research uses farm data from a balanced panel of 105 New York dairy farms from 2010 through 2019. Results reveal that there were 4 average, 2 good, and 4 poor financial years for these operations on average as measured by farm profitability. Solvency positions were relatively stable being based on long-term asset and liability values. During the poor years, the percent of farms below danger thresholds for liquidity and debt repayment capacity spiked.

Management of capital liquidity in public hospitals under the epidemic situation of COVID-19

The epidemic of COVID-19 has a great impact on the life and safety of people around the world. As the main force in the fight against COVID-19, the financial management of public hospitals will provide a strong guarantee for the diagnosis and treatment behavior of medical staff. The financial department needs to recognize the extent of the impact of COVID-19 on hospital finance, quantify and predict the potential risk factors, and develop reasonable financial management strategies. As an important part of assessing the financial health of public hospitals, the capital liquidity can be used as the focus direction of the hospital managers. In this study, we determine the effects of COVID-19 on the finance of public hospitals. Subsequently, we invested the conception, components, risk factors of capital liquidity in public hospitals. In addition, we provided some management strategies of capital liquidity in public hospitals under the epidemic of COVID-19. We deemed that good capital liquidity can ensure that medical staff have enough confidence and mentality to face the risk of death from COVID-19.

Financial liquidity and profitability of polish self-governing public health care institutions for the years 2016-2018

Currently, Polish therapeutic entities are forced to operate in an extremely turbulent environment and pursue two main goals: economic and social. The aim of this article is to diagnose the relationship between profitability and financial liquidity in Polish self-government health care institutions by assessing basic indicators of financial liquidity and profitability. The scope of work covered 1017 self-government independent health care institutions, which systematically published their financial statements for 2016-2018. The subject of the study was to analyze the relationship between the levels of profitability and financial liquidity ratios. The study used statistical and tabular-descriptive methods. On the basis of the obtained results it can be stated that the relation between the return on sales, return on equity and return on assets and liquidity (current, fast and immediate) was positive and the strength of this relation was strong and statistically significant. There was a statistically significant negative correlation between short-term liabilities and the return on sales, assets and equity. The cash conversion cycle has a significant positive impact on profitability (and vice versa). CONCLUSION. Entities that had higher profitability also had a higher degree of liquidity. They were also more efficient in inventory management and paid their liabilities faster. Summarizing the results of the study, it can be concluded that those entities that had higher profitability also had a higher degree of liquidity. They were also more efficient in inventory management and paid their liabilities faster.

Sustainability of airlines in India with Covid-19: Challenges ahead and possible way-outs

Coronavirus outbreak has been highly disruptive for aviation sector, threatening the survival and sustainability of airlines. Apart from massive losses attributed to suspended operations, industry foresee a grim recession ahead. Restrictive movements, weak tourism, curtailed income, compressed commercial activities and fear psychosis are expected to compress the passenger demand from 30 to 60%, endangering the commercial viability of airlines operation. Fragile to withstand the cyclic momentary shocks of oil price fluctuation, demand flux, declining currency, airlines in India warrants for robust structural changes in their operating strategies, business model, revenue and pricing strategies to survive the long-lasting consequences of Covid-19. Paper attempts to analyze impact of lockdown and covid crisis on airlines in India and possible challenges ahead. Study also suggests the possible way-out for mitigating the expected losses.

Covid-19 and high-yield emerging market bonds: insights for liquidity risk management

Around the apogee of the pandemic crisis in late March 2020, trading liquidity has evaporated out of high-yield (HY) bond markets across developing states. Concerned about this phenomenon, we assess emerging market (EM) debt liquidity as a combination of three metrics: (i) bid–ask spreads; (ii) relative liquidity score incorporating market depth, trading volumes, and time needed to liquidate an asset; and (iii) round-trip transaction costs—evidencing that all have worsened by the end of the first quarter of 2020. We complement our analysis by tracking the dynamics of the option-adjusted spreads of the EM HY bonds and document that the recovery trends of the credit and liquidity components in bonds spreads have decoupled in the aftermath of the Covid-triggered global meltdown. We evidence relevant differences in bond liquidity between chosen countries, representative of geopolitical regions. All the considered liquidity measures provide a coherent picture of the pandemic impact and allow for insights regarding the recovery from the crisis turmoil and the risk management of the EM HY bond portfolios throughout a systemic crisis.

Liquidity Is a Critical Determinant for Selective Autophagy of Protein Condensates

Clearance of biomolecular condensates by selective autophagy is thought to play a crucial role in cellular homeostasis. However, the mechanism underlying selective autophagy of condensates and whether liquidity determines a condensate's susceptibility to degradation by autophagy remain unknown. Here, we show that the selective autophagic cargo aminopeptidase I (Ape1) undergoes phase separation to form semi-liquid droplets. The Ape1-specific receptor protein Atg19 localizes to the surface of Ape1 droplets both in vitro and in vivo, with the "floatability" of Atg19 preventing its penetration into droplets. In vitro reconstitution experiments reveal that Atg19 and lipidated Atg8 are necessary and sufficient for selective sequestration of Ape1 droplets by membranes. This sequestration is impaired by mutational solidification of Ape1 droplets or diminished ability of Atg19 to float. Taken together, we propose that cargo liquidity and the presence of sufficient amounts of autophagic receptor on cargo are crucial for selective autophagy of biomolecular condensates.