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On Trades Under Asymmetric Information
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Author :Markus Konrad Brunnermeier Publisher :Oxford University Press, USA ISBN 13 :9780198296980 Total Pages :264 pages Book Rating :4.2/5 (969 download)
Book Synopsis Asset Pricing Under Asymmetric Information by : Markus Konrad Brunnermeier
Download or read book Asset Pricing Under Asymmetric Information written by Markus Konrad Brunnermeier and published by Oxford University Press, USA. This book was released on 2001 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: The role of information is central to the academic debate on finance. This book provides a detailed, current survey of theoretical research into the effect on stock prices of the distribution of information, comparing and contrasting major models. It examines theoretical models that explain bubbles, technical analysis, and herding behavior. It also provides rational explanations for stock market crashes. Analyzing the implications of asymmetries in information is crucial in this area. This book provides a useful survey for graduate students.
Book Synopsis Repeated Trade Under Asymmetric Information by : Lasse Heje Pedersen
Download or read book Repeated Trade Under Asymmetric Information written by Lasse Heje Pedersen and published by . This book was released on 2001 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis On Trades Under Asymmetric Information by : Frederic Gaston Sipiere
Download or read book On Trades Under Asymmetric Information written by Frederic Gaston Sipiere and published by . This book was released on 1987 with total page 144 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Asset Pricing under Asymmetric Information by : Markus K. Brunnermeier
Download or read book Asset Pricing under Asymmetric Information written by Markus K. Brunnermeier and published by OUP Oxford. This book was released on 2001-01-25 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset prices are driven by public news and information that is often dispersed among many market participants. These agents try to infer each other's information by analyzing price processes. In the past two decades, theoretical research in financial economics has significantly advanced our understanding of the informational aspects of price processes. This book provides a detailed and up-to-date survey of this important body of literature. The book begins by demonstrating how to model asymmetric information and higher-order knowledge. It then contrasts competitive and strategic equilibrium concepts under asymmetric information. It also illustrates the dependence of information efficiency and allocative efficiency on the security structure and the linkage between both efficiency concepts. No-Trade theorems and market breakdowns due to asymmetric information are then explained, and the existence of bubbles under symmetric and asymmetric information is investigated. The remainder of the survey is devoted to contrasting different market microstructure models that demonstrate how asymmetric information affects asset prices and traders' information , which provide a theoretical explanation for technical analysis and illustrate why some investors "chase the trend." The reader is then introduced to herding models and informational cascades, which can arise in a setting where agents' decision-making is sequential. The insights derived from herding models are used to provide rational explanations for stock market crashes. Models in which all traders are induced to search for the same piece of information are then presented to provide a deeper insight into Keynes' comparison of the stock market with a beauty contest. The book concludes with a brief summary of bank runs and their connection to financial crises.
Book Synopsis Trading Under Asymmetric Information by : Andrea Attardi
Download or read book Trading Under Asymmetric Information written by Andrea Attardi and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Ownership and Asymmetric Information Problems in the Corporate Loan Market by : Lewis Gaul
Download or read book Ownership and Asymmetric Information Problems in the Corporate Loan Market written by Lewis Gaul and published by CreateSpace. This book was released on 2015-01-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In credit markets, asymmetric information problems arise when borrowers have private information about their creditworthiness that is not observable by lenders. If these informational asymmetries do not negatively affect lenders' profitability, then they are irrelevant to lenders.
Book Synopsis Asymmetric Information, Corporate Finance, and Investment by : R. Glenn Hubbard
Download or read book Asymmetric Information, Corporate Finance, and Investment written by R. Glenn Hubbard and published by University of Chicago Press. This book was released on 2009-05-15 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
Book Synopsis Asymmetric Information and the Market Structure of the Banking Industry by : Mr.Giovanni Dell'Ariccia
Download or read book Asymmetric Information and the Market Structure of the Banking Industry written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 1998-06-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper analyzes the effects of informational asymmetries on the market structure of the banking industry in a multi-period model of spatial competition. All lenders face uncertainty with regard to borrowers’ creditworthiness, but, in the process of lending, incumbent banks gather proprietary information about their clients, acquiring an advantage over potential entrants. These informational asymmetries are an important determinant of the industry structure and may represent a barrier to entry for new banks. The paper shows that, in contrast with traditional models of horizontal differentiation, the steady-state equilibrium is characterized by a finite number of banks even in the absence of fixed costs.
Book Synopsis Insider Trading by : Ashraf A. Jaffer
Download or read book Insider Trading written by Ashraf A. Jaffer and published by . This book was released on 2006 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: While tradable securities remain a popular means of compensating managers, there is constant discussion on the need for tighter regulation, including disclosure requirements, to prevent employees from actually being able to gain from trading these securities based on their private information. The purpose of this paper is to provide insights into the role and economic consequences of disclosures aimed at reducing the ability to gain from insider trading. Using the principal-agent framework I show that in some situations allowing the agent to trade anonymously on his private information increases production and, more importantly, generates a Pareto improvement compared to the case where the agent's trades are required to be publicly disclosed. The intuition for this result is that the bid-ask spread imposed by the market maker makes it costly for the agent to sell his shares and get full insurance if he has taken a low-cost action. As a consequence, the agent takes the high-cost action with higher probability, which in turn makes the overall economy better off.
Book Synopsis A Model of Intertemporal Asset Prices Under Asymmetric Information by : Jiang Wang
Download or read book A Model of Intertemporal Asset Prices Under Asymmetric Information written by Jiang Wang and published by Legare Street Press. This book was released on 2022-10-27 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Book Synopsis Asymmetric Information and the Price Process by : Richard Ray Lindsey
Download or read book Asymmetric Information and the Price Process written by Richard Ray Lindsey and published by . This book was released on 1992 with total page 412 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Oxford Handbook of Entrepreneurial Finance by : Douglas Cumming
Download or read book The Oxford Handbook of Entrepreneurial Finance written by Douglas Cumming and published by OUP USA. This book was released on 2012-03-22 with total page 937 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a comprehensive picture of issues dealing with different sources of entrepreneurial finance and different issues with financing entrepreneurs. The Handbook comprises contributions from 48 authors based in 12 different countries.
Book Synopsis Taking Asymmetric Information Seriously by : Carolyn Sissoko
Download or read book Taking Asymmetric Information Seriously written by Carolyn Sissoko and published by . This book was released on 2013 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the problem of asymmetric information that exists in financial markets between the public and the market makers, that is, the securities dealers who support the stability of asset prices by carrying inventory over short periods of time. Market makers in modern markets typically have access to information about a broad range of markets and trade on the basis of this information. While trade on fundamental information about the value of assets is necessary for asset prices to be informative, trade on market information, such as the presence in the market of a highly motivated seller, often does not make prices more informative. Modern regulation in the U.S. has generally taken a permissive approach both to trading on market information, and also to the proliferation of conflicts of interest that increase profit opportunities from trading on market information. This paper critiques this regulatory approach by explaining that economic theory does not in general indicate that there are efficiency gains from permitting trading on market information, by describing an alternate model of a financial market, the pre-1986 London Stock Exchange which required dealers to avoid conflicts of interest and limited trading on market information by not making public the size of trades, and by discussing recent scandals that illustrate the costs of trading on market information.The costs and benefits of trading on market information are very difficult to measure because of the absence of benchmark prices against which the prices that are observed in markets can be compared. One proxy for measuring the net costs of such trading is the aggregate cost of financial intermediation: if this falls during a time period when conflicts of interest and opportunities to trade on market information have increased, then one might conclude that the consequences of trading on such information are unlikely to be large. In fact, over the relevant time period there was a dramatic increase in the costs of financial intermediation. While recognizing that the evidence offered here of social cost created by trading on market information is far from conclusive, this paper proposes two policies that could mitigate such costs: a requirement that market makers avoid conflicts of interest, and the non-release of some intraday market data to reduce the market information on which trade can take place.
Book Synopsis Volatility Information Trading and Its Implications for Information Asymmetry, Option Spreads, and Implied Volatility Skew by : Wei Quan
Download or read book Volatility Information Trading and Its Implications for Information Asymmetry, Option Spreads, and Implied Volatility Skew written by Wei Quan and published by . This book was released on 2013 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt: Information asymmetry is a critical element in today's financial markets. While asymmetric information related to directional information trading has been extensively studied in the existing literature, there is limited research and evidence on how volatility information trading impacts the options market. This dissertation studies, both theoretically and empirically, the behaviors of volatility information traders in options markets and the implications of their behaviors on information asymmetry and options pricing. I develop a model in which investors can trade multiple option contracts with varying strikes under an asymmetric framework. I show that volatility information trading is more likely to occur in Out of The Money (OTM) options if the overall presence of informed traders is low or if the relative liquidity in OTM options is better than At The Money (ATM) options. Moreover, I show that due to the variation in implicit leverage embedded in the option contracts, the OTM option contract contains a higher volatility information risk than the ATM option contract in equilibrium. In addition, I show that this volatility information risk differential plays a central role in forming the spread structure within an option series with the same underlying asset. Finally, I show that the shape of implied volatility skew (smile) is jointly determined by volatility uncertainty and heterogeneous information risk across the option contracts. I empirically examine the implications of my theory using US equity options data, including two intra-day trade and quote datasets from the Chicago Board Option Exchange (CBOE). I estimate the Volume-Synchronized Probability of Informed Trading (VPIN) variable to measure the volatility information risk in the option market. I show that OTM contracts, on average, have a higher probability of information trading than ATM contracts. I also document that volatility risk explains a considerable proportion of the spread variations in the US equity options market. Finally, I provide evidence that the difference in information asymmetry across strike prices not only helps to explain the dynamics of implied volatility skew but also has a significant impact on the degree to which a change in historical volatility affects the shape of the implied volatility skew.
Book Synopsis Asymmetric Information, Repeated Trade, and Asset Prices by : James McLoughlin
Download or read book Asymmetric Information, Repeated Trade, and Asset Prices written by James McLoughlin and published by . This book was released on 2012 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial intermediaries play an important role in the pricing of financial assets. For example, intermediaries may act on behalf of consumers in deciding how their wealth is invested, or they may act as providers of liquidity. This dissertation explores several ways in which intermediaries impact price informativeness, the transaction costs investors incur, and investor welfare. In the first chapter, I examine how prices reveal information when intermediaries are informed. Using a model of repeated trade between a long-lived, informed, price-discriminating market maker and risk averse traders with endogenous hedging demands, I first show that traders are weakly better off trading with an informed dealer, as they may learn something about an asset's value in the process of transacting. Second, while long-term incentives can induce an informed market maker to honestly reveal information and increase risk-sharing, they also enable the market maker to hide her information and extract more rents, reducing price informativeness. This less desirable outcome dominates with respect to both the parameter space and a selection criterion. Finally, measures of market quality, such as the transient component of price volatility (illiquidity), may not accurately reflect welfare. The second chapter discusses how relationships affect prices when intermediaries are concerned about adverse selection. When counter-parties trade in OTC markets, such as those for corporate bonds or derivatives, the lack of anonymity implies that future terms of trade can influence prices today. Using a model of repeated trade between an informed trader and uninformed market makers, I show that information asymmetry can affect the markups charged by dealers in two ways. First, for a given market structure (number of market makers), traders with more private information incur lower trading costs because dealers offer better terms to mitigate adverse selection. Second, even when dealers can not compete directly on price quotes, they compete indirectly by improving the informed trader's outside option, though this competition is imperfect. While repeated trade allows two given counter-parties to ameliorate adverse selection, the maximum number of dealers, and hence the total gains achievable, are limited by information frictions. An empirical implication is that the comparative statics of transaction costs only make sense conditional on market structure. The third chapter considers the effect intermediaries have as financial advisors, and whether measures of their performance as mutual fund managers accurately reflect the value they add to an economy. Relative to the existing literature, I look at how the presence of mutual funds affects the price of the underlying asset in an economy. Once this pricing effect is accounted for, I show that standard measures of mutual fund performance may not accurately reflect whether fund management is welfare improving.
Book Synopsis Could Asymmetric Information Alone Have Caused the Collapse of Private-Label Securitization? by : Daniel O. Beltran
Download or read book Could Asymmetric Information Alone Have Caused the Collapse of Private-Label Securitization? written by Daniel O. Beltran and published by DIANE Publishing. This book was released on 2010 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: A key feature of the 2007-2008 financial crisis is that for some classes of securities trade has ceased. And where trade does occur, it appears that market prices are well below what one might believe to be the intrinsic value for that class of security. This seems to be especially true for those securities where the payoff streams are particularly complex (for ex., CDOs). One explanation for this is that info. about these securities intrinsic values is asymmetric, with the current holders having better info. than potential buyers. The resulting adverse selection problem can help explain why more complex securities trade at significant discounts to their intrinsic values or do not trade at all. Charts and tables. This is a print on demand report.
Book Synopsis Asymmetric Information in Financial Markets by : Ricardo N. Bebczuk
Download or read book Asymmetric Information in Financial Markets written by Ricardo N. Bebczuk and published by Cambridge University Press. This book was released on 2003-08-21 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asymmetric information (the fact that borrowers have better information than their lenders) and its theoretical and practical evidence now forms part of the basic tool kit of every financial economist. It is a phenomenon that has major implications for a number of economic and financial issues ranging from both micro and macroeconomic level - corporate debt, investment and dividend policies, the depth and duration of business cycles, the rate of long term economic growth - to the origin of financial and international crises. Asymmetric Information in Financial Markets aims to explain this concept in an accessible way, without jargon and by reducing mathematical complexity. Using elementary algebra and statistics, graphs, and convincing real-world evidence, the author explores the foundations of the problems posed by asymmetries of information in a refreshingly accessible and intuitive way.
