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A healthy financial system encourages the efficient allocation of capital and risk. The collapse of the house price bubble led to the financial crisis that started in 2007. There is a large empirical literature concerning the relation between asset price bubbles and financial crises. I evaluate...
Persistent link: https://www.econbiz.de/10008534053
This interdisciplinary paper explains how mathematical techniques of stochastic optimal control can be applied to the recent subprime mortgage crisis. Why did the financial markets fail to anticipate the recent debt crisis, despite the large literature in mathematical finance concerning optimal...
Persistent link: https://www.econbiz.de/10005094473
average expectations. The standard case of no residual uncertainty and noise trading following a random walk is on the …
Persistent link: https://www.econbiz.de/10008583648
We consider a two-period market with persistent liquidity trading and risk averse privately informed investors who have … a one period horizon. With persistence, prices reflect average expectations about fundamentals and liquidity trading … the trading game. This introduces strategic complementarities in the use of information and can yield two stable …
Persistent link: https://www.econbiz.de/10008872222
profit opportunities by replicating the actions of traders. Specifically, the analysis is based on a trading robot which … simulates their behaviour, and incorporates variable transaction costs (spreads). The results suggest that trading strategies …
Persistent link: https://www.econbiz.de/10010764290
This paper contributes to the literature on default in general equilibrium. Borrowing and lending takes place via a clearing house (bank) which monitors agents and enforces contracts. Our model develops a concept of bankruptcy equilibrium that is a direct generalization of the standard general...
Persistent link: https://www.econbiz.de/10010877793
Initially, voting rights were limited to wealthy elites providing political support for stock markets. The franchise expansion induces the median voter to provide political support for banking development as this new electorate has lower financial holdings and benefits less from the uncertainty...
Persistent link: https://www.econbiz.de/10010877814
We explore empirically how capital inflows into the US and financial deregulation within the United States interacted in driving the run-up (and subsequent decline) in US housing prices over the period 1990-2012. To obtain an ex ante measure of financial liberalization, we focus on the history...
Persistent link: https://www.econbiz.de/10011272618
In the paper we analyze determinants of the capital market beta risk in Poland in the monthly period 1996-2002. The beta risk is measured as a time-varying parameter estimated in a regression of the Warsaw stock indexes (WIG and WIG20 separately) on major foreign stock market indexes (DJIA,...
Persistent link: https://www.econbiz.de/10005249463
This paper proposes new metrics for the process of price discovery on the main electronic trading platform for euro … by the level of trading activity. The implications of these empirical findings are discussed in the light of the debate …
Persistent link: https://www.econbiz.de/10009221548