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Author : Daehee Jeong
Publisher :
ISBN 13 : 9788980634996
Total Pages : 31 pages
Book Rating : 4.6/5 (349 download)
Download or read book Margin and Funding Liquidity written by Daehee Jeong and published by . This book was released on 2010 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Petri Jylha
Publisher :
ISBN 13 :
Total Pages : 38 pages
Book Rating : 4.:/5 (13 download)
Download or read book Does Funding Liquidity Cause Market Liquidity? Evidence from a Quasi-Experiment written by Petri Jylha and published by . This book was released on 2018 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using an exogenous reduction in margin requirements, this paper shows that funding liquidity causally affects market liquidity. On July 14, 2005 the Securities and Exchange Commission approved a pilot program that permitted portfolio margining of index options but not equity options. The resulting significant improvement of funding liquidity leads to an increase in trading volume, a decrease bid-ask spread, and a decrease in price impact for index options compared to the unaffected equity options. These results provide strong causal evidence in support of the theories presented by Gromb and Vayanos (2002) and Brunnermeier and Pedersen (2009).
Author : Markus K. Brunnermeier
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Market Liquidity and Funding Liquidity written by Markus K. Brunnermeier and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a model that links an asset's market liquidity (i.e., the ease with which it is traded) and traders' funding liquidity (i.e., the ease with which they can obtain funding). Traders provide market liquidity, and their ability to do so depends on their availability of funding. Conversely, traders' funding, i.e., their capital and margin requirements, depends on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and market liquidity and funding liquidity are mutually reinforcing, leading to liquidity spirals. The model explains the empirically documented features that market liquidity (i) can suddenly dry up, (ii) has commonality across securities, (iii) is related to volatility, (iv) is subject to “flight to quality,” and (v) co-moves with the market. The model provides new testable predictions, including that speculators' capital is a driver of market liquidity and risk premiums.
Author : Antonio Castagna
Publisher : John Wiley & Sons
ISBN 13 : 1119990246
Total Pages : 600 pages
Book Rating : 4.1/5 (199 download)
Download or read book Measuring and Managing Liquidity Risk written by Antonio Castagna and published by John Wiley & Sons. This book was released on 2013-09-03 with total page 600 pages. Available in PDF, EPUB and Kindle. Book excerpt: A fully up-to-date, cutting-edge guide to the measurement and management of liquidity risk Written for front and middle office risk management and quantitative practitioners, this book provides the ground-level knowledge, tools, and techniques for effective liquidity risk management. Highly practical, though thoroughly grounded in theory, the book begins with the basics of liquidity risks and, using examples pulled from the recent financial crisis, how they manifest themselves in financial institutions. The book then goes on to look at tools which can be used to measure liquidity risk, discussing risk monitoring and the different models used, notably financial variables models, credit variables models, and behavioural variables models, and then at managing these risks. As well as looking at the tools necessary for effective measurement and management, the book also looks at and discusses current regulation and the implication of new Basel regulations on management procedures and tools.
Author : Markus Konrad Brunnermeier
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (137 download)
Download or read book Market Liquidity and Funding Liquidity written by Markus Konrad Brunnermeier and published by . This book was released on 2007 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a model that links an asset's market liquidity - i.e., the ease with which it is traded - and traders' funding liquidity - i.e., the ease with which they can obtain funding. Traders provide market liquidity, and their ability to do so depends on their availability of funding. Conversely, traders' funding, i.e., their capital and the margins they are charged, depend on the assets' market liquidity. We show that, under certain conditions, margins are destabilizing and market liquidity and funding liquidity are mutually reinforcing, leading to liquidity spirals. The model explains the empirically documented features that market liquidity (i) can suddenly dry up, (ii) has commonality across securities, (iii) is related to volatility, (iv) is subject to "flight to quality", and (v) comoves with the market, and it provides new testable predictions.
Author : José Gabilondo
Publisher : Edward Elgar Publishing
ISBN 13 : 1783479175
Total Pages : 170 pages
Book Rating : 4.7/5 (834 download)
Download or read book Bank Funding, Liquidity, and Capital Adequacy written by José Gabilondo and published by Edward Elgar Publishing. This book was released on 2016-09-28 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focusing primarily on the banking system in the United States, this book offers an innovative framework that integrates a depository bank’s liquidity and its capital adequacy into a unified notion of funding that helps to explain how the 2007–2008 crisis unfolded, why central banks succeeded in resolving the crisis, and how the conceptual legacy of the crisis and its resolution led to lasting changes in bank funding regulation, including new objective requirements for bank liquidity. To provide a comparative context, the book also examines the funding models of non-bank intermediaries like dealer banks and insurers.
Author : Charles Biderman
Publisher : John Wiley & Sons
ISBN 13 : 0471726389
Total Pages : 209 pages
Book Rating : 4.4/5 (717 download)
Download or read book TrimTabs Investing written by Charles Biderman and published by John Wiley & Sons. This book was released on 2005-04-15 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: Whether you are an investment professional managing billions of dollars or an individual investor with a small nest egg, TrimTabs Investing shows you how to beat the major stock market averages with less risk. This groundbreaking book begins by comparing the stock market to a casino in which the house (public companies and the insiders who run them) buys and sells shares with the players (institutional and individual investors). TrimTabs Investing argues that stock prices are primarily a function of liquidity—the amount of shares available for purchase and the amount of money available to buy them—rather than fundamental value. Finally, it outlines the building blocks of liquidity theory and explains how you can use them to predict the direction of the stock market. “Charles Biderman, a savvy and battle-scarred veteran of the investment wars, has fashioned an intriguing approach to making money in the stock market that adroitly avoids both heavy-breathing speculation and the standard Wall Street practices that enable investors, big and small, to lose money in good markets as well as bad. Aimed at the sophisticated investor (which may or may not be an oxymoron), the book is written in blessedly straightforward prose and is a worthwhile read for anyone with an urge to have a fling at investing.--Alan Abelson Barron’s “Since the days of Joseph and Pharaoh, it has been axiomatic that the size of the grain harvest affects the level of grain prices; but today’s investors have been slow to appreciate the fact that the supply of stock shares significantly determines the level of stock prices. Biderman’s long overdue book outlines the theory and evidence behind ‘Trading Float,’ the actual—and exploitable—power behind major moves in the stock market. --Paul Montgomery CEO and CIO of Montgomery Capital Management “‘Trade as corporate execs do, not as they say.’ Charles Biderman has built an impressive list of hedge fund clients from this essential insight, and this book does a great job explaining exactly how retail investors can incorporate it into their investing.” --Eric Zitzewitz Assistant Professor of Economics, Stanford Graduate School of Business “Charles Biderman is a smart thinker, clear writer—and he offers here some very interesting ideas. This book is for the little guy who enjoys reading about money and economics, even if he doesn’t adopt the strategies offered here; and for the professional or sophisticated investor, who, to a greater or lesser degree, just might.--Andrew Tobias author of The Only Investment Guide You'll Ever Need
Author : Daehee Jeong
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (13 download)
Download or read book Margin and Funding Liquidity written by Daehee Jeong and published by . This book was released on 2016 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the global financial turmoil in 2007-2008, deviation from the covered interest parity (CIP) between the Korean won and US dollar through the foreign exchange swap has escalated in its magnitude beyond 1,000bp in November 2008, and it still persists around 100bp level. In this paper, we examine a newly developed margin based asset pricing model using Kalman filter approach and show that the escalation of the CIP deviation is found to be significantly related to the global dollar funding illiquidity and country-specific funding conditions. Furthermore, we find evidence that the poor funding conditions (or higher margins) are driven by the general money market illiquidity and may lead to higher funding illiquidity, which suggests the reinforcing effects of the liquidity spiral. We also show that the supply of dollar liquidity and improved funding conditions help alleviate the deviations from the parity, however the persistent anomaly is found to be related to the high level of exchange rate volatility.
Author :
Publisher : Lulu.com
ISBN 13 : 9291316695
Total Pages : 294 pages
Book Rating : 4.2/5 (913 download)
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Dermot Turing
Publisher : International Monetary Fund
ISBN 13 : 1484382404
Total Pages : 26 pages
Book Rating : 4.4/5 (843 download)
Download or read book The Morning After--The Impact on Collateral Supply After a Major Default written by Dermot Turing and published by International Monetary Fund. This book was released on 2018-10-31 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Changes to the regulatory system introduced after the financial crisis include not only mandatory clearing of OTC derivatives at central counterparties and margining of uncleared derivatives, but also prudential measures, including notably a “Liquidity Coverage Ratio” which obliges firms to set aside high-quality liquid assets (HQLA) as a stopgap against anticipated cash outflows. We examine factors which may affect the demand for HQLA in a severely stressed market following a hypothetical default of a major clearing member. Immediately following a major default, the amount of HQLA demanded by the whole market would spike. We estimate the size of the spike and draw conclusions as to whether the depth of the market is adequate to absorb it.
Author : Nicolae Gârleanu
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (731 download)
Download or read book Margin-based asset pricing and deviations from the law of one price written by Nicolae Gârleanu and published by . This book was released on 2011 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In a model with heterogeneous-risk-aversion agents facing margin constraints, we show how securities' required returns are characterized both by their betas and their margin requirements. Negative shocks to fundamentals make margin constraints bind, lowering risk-free rates and raising Sharpe ratios of risky securities, especially for high-margin securities. Such a funding-liquidity crisis gives rise to "bases, " that is, price gaps between securities with identical cash-flows but different margins. In the time series, bases depend on the shadow cost of capital, which can be captured through the interest-rate spread between collateralized and uncollateralized loans, and, in the cross section, they depend on relative margins. We test the model empirically using the CDS-bond bases and other deviations from the Law of One Price, and use it to evaluate central banks' lending facilities
Author : Mark Mitchell
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (12 download)
Download or read book Slow Moving Capital written by Mark Mitchell and published by . This book was released on 2007 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While multi-strategy hedge funds who were not capital constrained increased their positions, a large fraction of these funds actually acted as net sellers consistent with the view that information barriers within a firm (not just relative to outside investors) can lead to capital constraints for trading desks with mark-to-market losses. Our findings suggest that real world frictions impede arbitrage capital.
Author : Marco Macchiavelli
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (13 download)
Download or read book Funding Liquidity and Market Liquidity written by Marco Macchiavelli and published by . This book was released on 2019 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide the first direct analysis of how dealers' funding liquidity affects their liquidity provision in securities markets. Dealers' repo trading terms, including both haircuts and repo spreads, and their ability to finance their bond inventories through repos affect their bid-ask spreads and transaction costs in corporate bonds. Using dealers' exposure to the SEC 2016 money market fund reform as an instrument, we show that funding liquidity indeed has a causal effect on market liquidity. Dealers with lower funding liquidity tend to have smaller market shares and they execute more trades on an agency basis.
Author : Amir Akbari
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.:/5 (13 download)
Download or read book Reversals in Market Integration written by Amir Akbari and published by . This book was released on 2016 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an explanation for reversals in global equity market integration through the funding liquidity channel. I show that financial market integration decreases as funding constraints bind more strongly, consistent with limits to arbitrage and increased home bias during funding distress periods. An International Margin-CAPM, which incorporates borrowing frictions of international investors in the form of investor-specific and country-specific margin constraints, explains how reversals occur as funding liquidity becomes scarce. Empirically, the betting against beta portfolios of the model that load on funding liquidity comove less across markets during global funding distress periods. This suggests that at these times funding liquidity risk is local in nature. A funding-liquidity segmentation indicator, constructed from the betting against beta portfolios, not only fits the previously documented evidence on market segmentation, but also explains reversals in integration in the absence of foreign investment barriers.
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 : Matthias Rupprecht
Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (13 download)
Download or read book Funding Illiquidity written by Matthias Rupprecht and published by . This book was released on 2019 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a theoretical model for funding liquidity that extends the literature by allowing financial institutions to raise short-term unsecured funding in addition to secured funding. We identify a new liquidity spiral, a credit limit spiral, for unsecured funding and show how it reinforces the margin and loss spiral for secured funding. Our model brings to light a dual role of margins. While higher margins reduce secured funding, they relax the funding constraint in the unsecured market ceteris paribus. We show that there is commonality and substitution effects in funding illiquidity, and discuss how central bank and regulatory policies can prevent illiquidity.
Author : Abdourahmane Sarr
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (318 download)
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.
