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What Determines Bid Ask Spreads In Over The Counter Markets
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Book Synopsis What Determines Bid-Ask Spreads in Over-the-Counter Markets? by : Peter Feldhütter
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.
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:
Book Synopsis The Economics of the Stock Market by : Richard R. West
Download or read book The Economics of the Stock Market written by Richard R. West and published by New York : Praeger. This book was released on 1971 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Derivatives and Hedge Funds by : Stephen Satchell
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.
Book Synopsis Discriminatory Pricing of Over-the-Counter Derivatives by : Hau Harald
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.
Download or read book Dark Markets written by Darrell Duffie and published by Princeton University Press. This book was released on 2012-01-08 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book offers a concise introduction to OTC markets by explaining key conceptual issues and modeling techniques, and by providing readers with a foundation for more advanced subjects in this field.
Book Synopsis The Microstructure of Foreign Exchange Markets by : Jeffrey A. Frankel
Download or read book The Microstructure of Foreign Exchange Markets written by Jeffrey A. Frankel and published by University of Chicago Press. This book was released on 2009-05-15 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: The foreign exchange market is the largest, fastest-growing financial market in the world. Yet conventional macroeconomic approaches do not explain why people trade foreign exchange. At the same time, they fail to explain the short-run determinants of the exchange rate. These nine innovative essays use a microstructure approach to analyze the workings of the foreign exchange market, with special emphasis on institutional aspects and the actual behavior of market participants. They examine the volume of transactions, heterogeneity of traders, the time of day and location of trading, the bid-ask spread, and the high level of exchange rate volatility that has puzzled many observers. They also consider the structure of the market, including such issues as nontransparency, asymmetric information, liquidity trading, the use of automated brokers, the relationship between spot and derivative markets, and the importance of systemic risk in the market. This timely volume will be essential reading for anyone interested in the economics of international finance.
Book Synopsis Bid-asked Spreads on the Over-the-counter Market by : Mitchell L. Kasper
Download or read book Bid-asked Spreads on the Over-the-counter Market written by Mitchell L. Kasper and published by . This book was released on 1977 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Liquidity and Asset Prices by : Yakov Amihud
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Book Synopsis Measuring Liquidity in Financial Markets by : Abdourahmane Sarr
Download or read book Measuring Liquidity in Financial Markets written by Abdourahmane Sarr and published by International Monetary Fund. This book was released on 2002-12 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.
Book Synopsis Why Trade Over-the-Counter? When Investors Want Price Discrimination by : Tomy Lee
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.
Book Synopsis Contractual Arrangements for Intertemporal Trade by : Edward C. Prescott
Download or read book Contractual Arrangements for Intertemporal Trade written by Edward C. Prescott and published by U of Minnesota Press. This book was released on 1987 with total page 173 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Market Liquidity by : Thierry Foucault
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"--
Book Synopsis The Role of Market Makers in Liquidity Providing on Emerging OTC Markets by : Piotr Mielus
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.
Book Synopsis Market Microstructure in Emerging and Developed Markets by : H. Kent Baker
Download or read book Market Microstructure in Emerging and Developed Markets written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2013-07-31 with total page 758 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to the dynamic area of finance known as market microstructure Interest in market microstructure has grown dramatically in recent years due largely in part to the rapid transformation of the financial market environment by technology, regulation, and globalization. Looking at market transactions at the most granular level—and taking into account market structure, price discovery, information flows, transaction costs, and the trading process—market microstructure also forms the basis of high-frequency trading strategies that can help professional investors generate profits and/or execute optimal transactions. Part of the Robert W. Kolb Series in Finance, Market Microstructure skillfully puts this discipline in perspective and examines how the working processes of markets impact transaction costs, prices, quotes, volume, and trading behavior. Along the way, it offers valuable insights on how specific features of the trading process like the existence of intermediaries or the environment in which trading takes place affect the price formation process. Explore issues including market structure and design, transaction costs, information flows, and disclosure Addresses market microstructure in emerging markets Covers the legal and regulatory issues impacting this area of finance Contains contributions from both experienced financial professionals and respected academics in this field If you're looking to gain a firm understanding of market microstructure, this book is the best place to start.
Book Synopsis The Microstructure of Government Securities Markets by : Mr.Peter Dattels
Download or read book The Microstructure of Government Securities Markets written by Mr.Peter Dattels and published by International Monetary Fund. This book was released on 1995-11 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper applies the “market microstructure” literature to the specific features of government securities markets and draws implications for the strategy to develop government securities markets. It argues for an active role of the authorities in fostering the development of efficient market structures.
Book Synopsis Trading and Exchanges by : Larry Harris
Download or read book Trading and Exchanges written by Larry Harris and published by OUP USA. This book was released on 2003 with total page 664 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focusing on market microstructure, Harris (chief economist, U.S. Securities and Exchange Commission) introduces the practices and regulations governing stock trading markets. Writing to be understandable to the lay reader, he examines the structure of trading, puts forward an economic theory of trading, discusses speculative trading strategies, explores liquidity and volatility, and considers the evaluation of trader performance. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).
