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Asset allocation and risk taking under different interest rate regimes

Hermans, Lieven; Kostka, Thomas; Vassallo, Danilo - 2023

We study the effects of low short-term interest rates on the optimal portfolio allocation in Markowitz portfolios and Risk parity portfolios. We propose a measure of Portfolio Instability, gauging the amount of optimal portfolio shifts needed to respond to exogenous shocks to the expected risk...

Persistent link: https://www.econbiz.de/10014278642

High frequency trading and fragility

Cespa, Giovanni; Vives, Xavier - 2017

We show that limited dealer participation in the market, coupled with an informational friction resulting from high frequency trading, can induce demand for liquidity to be upward sloping and strategic complementarities in traders' liquidity consumption decisions: traders demand more liquidity...

Persistent link: https://www.econbiz.de/10011637013

Market Liquidity and Competition among Designated Market Makers

Bellia, Mario; Pelizzon, Loriana; Subrahmanyam, Marti G.; … - 2023

Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? We employ data from NYSE Euronext Paris to show that exogenous changes in contract design lead to significant decreases in quoted and effective spreads. In particular, market liquidity increases...

Persistent link: https://www.econbiz.de/10014351548

Financial intermediation and technology : what's old, what's new?

Boot, Arnoud W. A.; Hoffmann, Peter; Laeven, Luc; … - 2020

information (data collection and processing) and communication (relationships and distribution). Both follow historic trends … towards an increased use of hard information and less inperson interaction, which are accelerating rapidly. We point to more …

Persistent link: https://www.econbiz.de/10012241264

Are asset price data informative about news shocks? : a DSGE perspective

Iskrev, Nikolay - 2018

models containing news shocks. This paper shows how to formally evaluate the information content of observed variables with …

Persistent link: https://www.econbiz.de/10011864177

Collateral booms and information depletion

Asriyan, Vladimir; Laeven, Luc; Martin, Alberto - 2019

We develop a new theory of information production during credit booms. In our model, entrepreneurs need credit to … themselves from such diversion in two ways: collateralization and costly screening, which generates durable information about … accumulates physical capital but depletes information about investment projects. As a result, collateral-driven booms end in deep …

Persistent link: https://www.econbiz.de/10011997468

A VAR analysis for the uncovered interest parity and the ex-ante purchasing power parity : the role of macroeconomic and financial information

Macchiarelli, Corrado - 2011

expectational terms, thus assuming agents to bear on the uncertainty of future exchange rate changes and inflation dynamics. The …

Persistent link: https://www.econbiz.de/10009405601

Systemic Co-Jumps

Caporin, Massimiliano - 2016

The simultaneous occurrence of jumps in several stocks can be associated with major financial news, triggers short-term predictability in stock returns, is correlated with sudden spikes of the variance risk premium, and determines a persistent increase (decrease) of stock variances and...

Persistent link: https://www.econbiz.de/10012981275

Foreign-currency bonds : currency choice and the role of uncovered and covered interest parity

Habib, Maurizio Michael; Joy, Mark - 2008

Using count-data techniques, this paper studies the determinants of currency choice in the issuance of foreign-currency-denominated bonds. In particular, we investigate whether bond issuers choose their issuance currency in order to exploit the borrowing-cost savings associated with deviations...

Persistent link: https://www.econbiz.de/10003794028

The Cost of Capital in Markets with Opaque Intermediaries and the Risk-Structure of Interest Rates

Mierzejewski, Fernando - 2009

The demand for cash balances of financial intermediaries that establish contractual liabilities with credit-sensitive customers is characterized. As stated by Merton, the success of the business activities of such firms crucially depends on their credit quality, and hence, they are obliged to...

Persistent link: https://www.econbiz.de/10013160192