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Author : Koralai Kirabaeva
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (731 download)
Download or read book Adverse Selection, Liquidity, and Market Breakdown written by Koralai Kirabaeva and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Bank of Canada
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (874 download)
Download or read book Adverse Selection, Liquidity, and Market Breakdown. December 2010 written by Bank of Canada and published by . This book was released on 2010 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Bengt Holmstrom
Publisher : MIT Press
ISBN 13 : 0262518538
Total Pages : 263 pages
Book Rating : 4.2/5 (625 download)
Download or read book Inside and Outside Liquidity written by Bengt Holmstrom and published by MIT Press. This book was released on 2013-01-11 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.
Author : Qi Li
Publisher :
ISBN 13 : 9780438083424
Total Pages : 66 pages
Book Rating : 4.0/5 (834 download)
Download or read book Securitization and Liquidity Creation in Markets with Adverse Selection written by Qi Li and published by . This book was released on 2018 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an information-based theory of tranching, a practice in which sellers slice a financial asset into debt securities with different seniority. I use the competitive search framework to analyze asset-backed security markets with adverse selection and find that tranching is a robust equilibrium outcome. Tranching decomposes the asset into "information insensitive" and "information sensitive" components. The expected cash flow of the information insensitive component is independent of the seller's private signal, whereas the expected cash flow of the information sensitive component varies with the signal. When buyers are restricted to trade shares of assets, they have to purchase both components proportionally. Tranching, however, allows buyers to disproportionately purchase the information insensitive component. As a result, buyers are less concerned about adverse selection, and total trading volume in the market increases. My model also generates testable predictions on the liquidity of individual debt securities: the selling probability of a debt security increases in its seniority, which is observable to buyers, yet decreases with its performance, which is ex-ante unobservable to buyers; these predictions are supported by my empirical analysis of the non-agency MBS market. (JEL D82, G12, G32).
Author : François-Serge Lhabitant
Publisher : John Wiley & Sons
ISBN 13 : 0470181699
Total Pages : 502 pages
Book Rating : 4.4/5 (71 download)
Download or read book Stock Market Liquidity written by François-Serge Lhabitant and published by John Wiley & Sons. This book was released on 2008-01-09 with total page 502 pages. Available in PDF, EPUB and Kindle. Book excerpt: Brings together today's best financial minds across the world to discuss the issue of liquidity in today's markets. It is often proxied by trade-based measures (such as trading volume, frequency of trading, dollar value of shares trade, etc), order based measures and price impact measures.
Author : Stefan Frey
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)
Download or read book Liquidity Supply and Adverse Selection in a Pure Limit Order Book Market written by Stefan Frey and published by . This book was released on 2009 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Based on a structural model we analyze adverse selection costs and liquidity supply in a pure open limit order book market. Given the discontenting empirical model performance reported in the previous literature, we relax restrictive assumptions of the underlying theoretical model concerning order book equilibrium and the distribution of market order volumes. We demonstrate that the resulting revised econometric methodology delivers considerably improved empirical results. Employing the alternative approach in a cross sectional analysis we provide evidence that adverse selection costs are more severe for smaller capitalized stocks, and find empirical support for one of the main hypothesis put forth by the theory of limit order book markets, which states that liquidity supply and adverse selection costs are inversely related. We also show that adverse selection component estimates based on the formal model and those obtained using popular model-free methods are closely correlated. This result indicates the robustness of the structural model, but also provides a theoretical underpinning for the application of the ad hoc method to limit order book data.
Author : Franklin Allen
Publisher : Oxford University Press, USA
ISBN 13 : 0195390717
Total Pages : 719 pages
Book Rating : 4.1/5 (953 download)
Download or read book Liquidity and Crises written by Franklin Allen and published by Oxford University Press, USA. This book was released on 2011-02-03 with total page 719 pages. Available in PDF, EPUB and Kindle. Book excerpt: One important cause of the 2007-2009 crisis was illiquidity combined with exposure of many financial institutions to liquidity needs. But what is liquidity and why is it so important for financial institutions to command enough liquidity? This book brings together classic articles and recent contributions to this important field.
Author : Benjamin Lester
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (864 download)
Download or read book Trading Dynamics in Decentralized Markets with Adverse Selection written by Benjamin Lester and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors study a dynamic, decentralized lemons market with one-time entry and characterize its set of non-stationary equilibria. This framework offers a theory of how a market suffering from adverse selection recovers over time endogenously; given an initial fraction of lemons, the model provides sharp predictions about how prices and the composition of assets evolve over time. Comparing economies in which the initial fraction of lemons varies, the authors study the relationship between the severity of the lemons problem and market liquidity. They use this framework to understand how asymmetric information contributed to the breakdown in trade of asset-backed securities during the recent financial crisis, and to evaluate the efficacy of one policy that was implemented in attempt to restore liquidity.
Author : Hasan Pirkul
Publisher :
ISBN 13 :
Total Pages : 348 pages
Book Rating : 4.3/5 (243 download)
Download or read book Strategic Trading and Adverse-selection Costs written by Hasan Pirkul and published by . This book was released on 1987 with total page 348 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Briana Chang
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (863 download)
Download or read book Adverse Selection and Liquidity Distortion in Decentralized Markets written by Briana Chang and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Christoph Bertsch
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (861 download)
Download or read book A Detrimental Feedback Loop written by Christoph Bertsch and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Thierry Foucault
Publisher : Oxford University Press
ISBN 13 : 0197542069
Total Pages : 531 pages
Book Rating : 4.1/5 (975 download)
Download or read book Market Liquidity written by Thierry Foucault and published by Oxford University Press. This book was released on 2023 with total page 531 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Author : Albert S. Kyle
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (124 download)
Download or read book Adverse Selection and Liquidity: from Theory to Practice written by Albert S. Kyle and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sudipto Bhattacharya
Publisher :
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.X/5 (6 download)
Download or read book Insider Trading, Investment and Liquidity written by Sudipto Bhattacharya and published by . This book was released on 1999 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Gene Amromin
Publisher : DIANE Publishing
ISBN 13 : 1437987850
Total Pages : 57 pages
Book Rating : 4.4/5 (379 download)
Download or read book Complex Mortgages (CM) written by Gene Amromin and published by DIANE Publishing. This book was released on 2011 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: CM became a popular borrowing instrument during the bullish housing market of the early 2000s but vanished rapidly during the subsequent downturn. These non-traditional loans (interest only, negative amortization, and teaser mortgages) enable households to postpone loan repayment compared to traditional mortgages and hence relax borrowing constraints. But, they increase household leverage and heighten dependence on mortgage refinancing. CM were chosen by prime borrowers with high income levels seeking to purchase expensive houses relative to their incomes. Borrowers with CM experience substantially higher ex post default rates than borrowers with traditional mortgages with similar characteristics. Illus. This is a print on demand report.
Author : Mario Bellia
Publisher :
ISBN 13 :
Total Pages : 70 pages
Book Rating : 4.:/5 (13 download)
Download or read book High-Frequency Market Making written by Mario Bellia and published by . This book was released on 2018 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using data from the NYSE Euronext Paris, with a specific identifier for electronic market- making activity, I examine the role of designated liquidity providers played by high-frequency traders (HFTs) as introduced by the forthcoming MiFID II regulation. I find that HFTs do provide liquidity to the market, but strategically so, to avoid being adversely selected by other fast traders when providing liquidity to them. Conversely, when they provide liquidity to slow traders, there is no evidence of adverse selection. I exploit a change in the liquidity provision agreement that introduces more competition among market makers. I show that higher competition is beneficial for the market. Liquidity provision increases and the quoted bid-ask spread decreases, as well as the adverse selection costs faced by all traders, especially for slow traders.
Author : Sugato Chakravarty
Publisher :
ISBN 13 :
Total Pages : 35 pages
Book Rating : 4.:/5 (37 download)
Download or read book Estimating the adverse selection cost in markets with multiple informed traders written by Sugato Chakravarty and published by . This book was released on 1997 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:
