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Download or read book Bid-ask Spreads in OTC Markets written by and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Niranjan Tripathy
Publisher :
ISBN 13 :
Total Pages : 368 pages
Book Rating : 4.:/5 (171 download)
Download or read book An Empirical Study of the Effects of Systematic Risk on the Security Dealer's Bid-ask Spreads in the OTC Market written by Niranjan Tripathy and published by . This book was released on 1987 with total page 368 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Hau Harald
Publisher : International Monetary Fund
ISBN 13 : 1498303773
Total Pages : 45 pages
Book Rating : 4.4/5 (983 download)
Download or read book Discriminatory Pricing of Over-the-Counter Derivatives written by Hau Harald and published by International Monetary Fund. This book was released on 2019-05-07 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: New regulatory data reveal extensive price discrimination against non-financial clients in the FX derivatives market. The client at the 90th percentile pays an effective spread of 0.5%, while the bottom quarter incur transaction costs of less than 0.02%. Consistent with models of search frictions in over-the-counter markets, dealers charge higher spreads to less sophisticated clients. However, price discrimination is eliminated when clients trade through multi-dealer request-for-quote platforms. We also document that dealers extract rents from captive clients and market opacity, but only for contracts negotiated bilaterally with unsophisticated clients.
Author : Peter Feldhütter
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.:/5 (13 download)
Download or read book What Determines Bid-Ask Spreads in Over-the-Counter Markets? written by Peter Feldhütter and published by . This book was released on 2018 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We document cross-sectional variation in bid-ask spreads in the U.S. corporate bond market and use the variation to test OTC theories of the bid-ask spread. Bid-ask spreads, measured by realized transaction costs, increase with maturity for investment grade but not for speculative grade bonds. For short-maturity bonds, spreads increase with credit risk while long-maturity bonds rated AAA/AA have significantly higher spreads than other investment grade bonds. We find that dealer inventory is the most important determinant of the variation in bid-ask spreads. How bond sales travel through the network of dealers also explains part of the variation, particularly for speculative grade bonds. In contrast, search-and-bargaining frictions and asymmetric information have limited explanatory power.
Author : Stephen Satchell
Publisher : Springer
ISBN 13 : 1137554177
Total Pages : 416 pages
Book Rating : 4.1/5 (375 download)
Download or read book Derivatives and Hedge Funds written by Stephen Satchell and published by Springer. This book was released on 2016-05-18 with total page 416 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last 20 years hedge funds and derivatives have fluctuated in reputational terms; they have been blamed for the global financial crisis and been praised for the provision of liquidity in troubled times. Both topics are rather under-researched due to a combination of data and secrecy issues. This book is a collection of papers celebrating 20 years of the Journal of Derivatives and Hedge Funds (JDHF). The 18 papers included in this volume represent a small sample of influential papers included during the life of the Journal, representing industry-orientated research in these areas. With a Preface from co-editor of the journal Stephen Satchell, the first part of the collection focuses on hedge funds and the second on markets, prices and products.
Author : Tomy Lee
Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (13 download)
Download or read book Why Trade Over-the-Counter? When Investors Want Price Discrimination written by Tomy Lee and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the availability of low-cost exchanges, over-the-counter (OTC) trading is pervasive for most assets. We explain the prevalence of OTC trading using a model of adverse selection, in which informed and uninformed investors choose to trade over-the-counter or on an exchange. OTC dealers' ability to price discriminate allows them to imperfectly cream-skim the uninformed investors from the exchange. Assets with a higher share of trades executed on exchanges are predicted to have wider bid-ask spreads on those exchanges, as supported by evidence from US stocks. Having an OTC market can reduce welfare while increasing total trade volume and decreasing average bid-ask spread. Specifically, for assets that are mostly traded over-the-counter (such as swaps and bonds), having the OTC market actually harms welfare. Our results justify recent policies that seek to end OTC trading in such assets.
Author : Richard D. Fortin
Publisher :
ISBN 13 :
Total Pages : 400 pages
Book Rating : 4.:/5 (183 download)
Download or read book A Longitudinal Study of OTC Dealer Proportional Bid-ask Spreads written by Richard D. Fortin and published by . This book was released on 1988 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Bong Jin Yang
Publisher :
ISBN 13 :
Total Pages : 244 pages
Book Rating : 4.:/5 (141 download)
Download or read book The Effect of the Federal Reserve Board's Margin Credit Control on the Dealers' Bid-ask Spread in the OTC Stock Market written by Bong Jin Yang and published by . This book was released on 1986 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Piotr Mielus
Publisher :
ISBN 13 :
Total Pages : 14 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Role of Market Makers in Liquidity Providing on Emerging OTC Markets written by Piotr Mielus and published by . This book was released on 2015 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Market makers are key entities providing liquidity to the market. Their activity has influence on transaction costs that are expressed mainly by bid-ask spreads. On unregulated markets a research is quite often cumbersome due to lack of transparent data. The paper presents factors having influence on bid-ask spread quoted by market makers on selected over-the-counter emerging markets. The basis for the analysis are questionnaires provided by local market makers and reports regarding market structure published by market participants. The research encapsulates influence of price volatility, volumes, number and type of market makers on transaction costs. A dependence between these factors has been identified as well as determinants that motivate market makers to narrow the spreads. The spreads are lower in high volume and low volatility environment. Transaction costs are also dependent on a deal size and a current state of the market. Significant diversity of market participants and competition between market makers favour compression of bid-ask spreads even if prices are volatile and regard derivatives.
Author : Nick Cavalla
Publisher : Springer
ISBN 13 : 1349130532
Total Pages : 308 pages
Book Rating : 4.3/5 (491 download)
Download or read book OTC Markets in Derivative Instruments written by Nick Cavalla and published by Springer. This book was released on 2016-07-27 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: To date, most academic and practical texts have concentrated on the exchange-traded markets and focused on the nature and price characteristics of the various listed instruments. By contrast, OTC Markets in Derivative Instruments deals in detail with the complexities of the over-the-counter markets - extending a description of the core products to a discussion of real world applications and risks. Regulatory, accounting and tax issues are also covered. Contributors include Bankers Trust, BZW, GNI, Goldman Sachs, J.P. Morgan, Natwest Futures, Midland Montagu and Mitsubishi.
Author : Mr.Jens Nystedt
Publisher : International Monetary Fund
ISBN 13 : 145184820X
Total Pages : 49 pages
Book Rating : 4.4/5 (518 download)
Download or read book Derivative Market Competition written by Mr.Jens Nystedt and published by International Monetary Fund. This book was released on 2004-04-01 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent regulatory initiatives in the United States have again raised the issue of a 'level regulatory and supervisory playing field' and the degree of competition globally between over-the-counter (OTC) derivatives and organized derivative exchange (ODE) markets. This paper models some important aspects of how an ODE market interrelates with the OTC markets. It analyzes various ways in which an ODE market can respond to competition from the OTC markets and considers whether ODE markets would actually benefit from a more level playing field. Among other factors, such as different transaction costs, different abilities to mitigate credit risk play a significant role in determining the degree of competition between the two types of markets. This implies that a potentially important service ODE markets can provide OTC market participants is to extend clearing services to them. Such services would allow the OTC markets to focus more on providing less competitive contracts/innovations and instead customize its contracts to specific investors' risk preferences and needs.
Author : Rainer Jankowitsch
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)
Download or read book Price Dispersion in OTC Markets written by Rainer Jankowitsch and published by . This book was released on 2008 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we model price dispersion effects in over-the-counter (OTC) markets to show that in the presence of inventory risk for dealers and search costs for investors, traded prices may deviate from the expected market valuation of an asset. We interpret this deviation as a liquidity effect and develop a new liquidity measure quantifying the price dispersion in the context of the US corporate bond market. This market offers a unique opportunity to study liquidity effects since, from October 2004 onwards, all OTC transactions in this market have to be reported to a common database known as the Trade Reporting and Compliance Engine (TRACE). Furthermore, market-wide average price quotes are available from Markit Group Limited, a financial information provider. Thus, it is possible, for the first time, to directly observe deviations between transaction prices and the expected market valuation of securities. We quantify and analyze our new liquidity measure for this market and find significant price dispersion effects that cannot be simply captured by bid-ask spreads. We show that our new measure is indeed related to liquidity by regressing it on commonly-used liquidity proxies and find a strong relation between our proposed liquidity measure and bond characteristics, as well as trading activity variables. Furthermore, we evaluate the reliability of end-of-day marks that traders use to value their positions. Our evidence suggests that the price deviations are significantly larger and more volatile than previously assumed. Overall, the results presented here improve our understanding of the drivers of liquidity and are important for many applications in OTC markets, in general.
Author : Tee Ngay Lim
Publisher :
ISBN 13 :
Total Pages : 208 pages
Book Rating : 4.:/5 (29 download)
Download or read book Essays on the BID-ASK Spread written by Tee Ngay Lim and published by . This book was released on 1987 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Marti G. Subrahmanyam
Publisher :
ISBN 13 :
Total Pages : 38 pages
Book Rating : 4.:/5 (129 download)
Download or read book Price Dispersion in OTC Markets written by Marti G. Subrahmanyam and published by . This book was released on 2012 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we model price dispersion effects in over-the-counter (OTC) markets to show that, in the presence of inventory risk for dealers and search costs for investors, traded prices may deviate from the expected market valuation of an asset. We interpret this deviation as a liquidity effect and develop a new liquidity measure quantifying the price dispersion in the context of the US corporate bond market. This market offers a unique opportunity to study liquidity effects since, from October 2004 onwards, all OTC transactions in this market have to be reported to a common database known as the Trade Reporting and Compliance Engine (TRACE). Furthermore, market-wide average price quotes are available from Markit Group Limited, a financial information provider. Thus, it is possible, for the first time, to directly observe deviations between transaction prices and the expected market valuation of securities. We quantify and analyze our new liquidity measure for this market and find significant price dispersion effects that cannot be simply captured by bid-ask spreads. We show that our new measure is indeed related to liquidity by regressing it on commonly-used liquidity proxies and find a strong relation between our proposed liquidity measure and bond characteristics, as well as trading activity variables. Furthermore, we evaluate the reliability of end-of-day marks that traders use to value their positions. Our evidence suggests that the price deviations from expected market valuations are significantly larger and more volatile than previously assumed. Overall, the results presented here improve our understanding of the drivers of liquidity and are important for many applications in OTC markets, in general.
Author : Jan Hanousek
Publisher :
ISBN 13 : 9788086288420
Total Pages : 35 pages
Book Rating : 4.2/5 (884 download)
Download or read book How important is informed trading for the bid-ask spread? : evidence from an emerging market written by Jan Hanousek and published by . This book was released on 2000 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Dan Galai
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (129 download)
Download or read book Embedded Insights from an OTC FX Options Market written by Dan Galai and published by . This book was released on 2008 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study proposes a more robust estimation of the implied volatility in the FX market, offers a possible explanation to the observed quot;smilequot; in implied volatilities based on a quot;clientele effectquot;, and tests the predictability of future volatilities in the FX market. We employ detailed data on OTC foreign exchange options trading that enable us to examine the behavior of the key players (financial companies, non-financial firms, households and foreign investors) and the investment strategies (straddles, strangles, reversals, synthetic futures, naked calls, and naked puts) used during relatively turbulent and tranquil periods.
Author : Ryan Lessman Davis
Publisher :
ISBN 13 :
Total Pages : 171 pages
Book Rating : 4.:/5 (959 download)
Download or read book Prices, Trading Activity, and Market Quality in the Modern OTC Marketplace written by Ryan Lessman Davis and published by . This book was released on 2016 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Part 1, I study over 10,000 OTC securities that are organized into one of three tiered marketplaces (OTCQX, OTCQB, and OTC Pink) based on the quality and quantity of information a firm makes available. My analysis adds to the literature by providing a more complete picture of trading in this market. I examine determinants of trading within the tiers and compare trading metrics of the biggest return winners and losers during the sample period. I also examine if day-of-the week effects previously documented for listed securities exist in the OTC market. A large portion of these securities are penny stocks trading under five dollars per share. In Part 2, I compare penny stock behavior across price partitions and OTC marketplace tiers. I also compare market quality metrics of penny stocks trading OTC to those of listed securities priced five dollars and under. I document positive externalities resulting from the lottery-like features of penny stocks. In particular, I find that OTC penny stocks trade more often than their non-penny counterparts. However, on average, increased investor interest does not lead to an improvement in bid-ask spreads for these securities relative to non-penny OTC securities. I also find that penny stocks designated to higher information tiers are more liquid than penny stocks designated to lower information tiers. Lastly, in Part 3, I examine short interest in OTC stocks by price, tier, and stock and firm characteristics to determine the effects of transparency on short selling in the OTC market. I also study the daily return performances of securities with differing levels of short interest to determine if OTC securities behave as predicted by a theoretical model provided by Ang, Shtauber, and Tetlock (2013). I find that larger, more liquid stocks, and stocks in lower information tiers, are easier to short. Additionally, although American Depository Receipts (ADRs) tend to display higher levels of institutional participation, these securities are more difficult to short than common stocks and ordinary shares. Overall, my results provide support for studies suggesting that the difficulty shorting OTC stocks adds to the lottery-like features of OTC securities.
