Showing 1 - 10 of 19
We analyze the impact of a minimum price variation (tick) and time priority on the dynamics of quotes and the trading costs when competition for the order flow is dynamic. We find that convergence to competitive outcomes can take time and that the speed of convergence is influenced by the tick...
Persistent link: https://www.econbiz.de/10005572573
We show that the Heston volatility or equivalently the Cox-Ingersoll-Ross process is Malliavin differentiable and give an explicit expression for the derivative. This result assures the applicability of Malliavin calculus in the framework of the Heston stochastic volatility model and the...
Persistent link: https://www.econbiz.de/10005772060
How do organizations cope with extreme uncertainty? The existing literature is divided on this issue: some argue that organizations deal best with uncertainty in the environment by reproducing it in the organization, whereas others contend that the orga nization should be protected from the...
Persistent link: https://www.econbiz.de/10005772119
Our task in this paper is to analyze the organization of trading in the era of quantitative finance. To do so, we conduct an ethnography of arbitrage, the trading strategy that best exemplifies finance in the wake of the quantitative revolution. In contrast to value and momentum investing, we...
Persistent link: https://www.econbiz.de/10005772431
We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, exposure...
Persistent link: https://www.econbiz.de/10011099198
We present a simple model of sovereign debt crises in which a country chooses its optimal mix of short and long-term debt contracts subject to standard contracting frictions: the country cannot commit to repay its debts nor to a specific path of future debt issues, and contracts cannot be made...
Persistent link: https://www.econbiz.de/10011206911
In 2007, countries in the euro periphery were enjoying stable growth, low deficits, and low spreads. Then the financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,...
Persistent link: https://www.econbiz.de/10010849603
As a result of debt enforcement problems, many high-productivity firms in emerging economies are unable to pledge enough future profits to their creditors and this constrains the financing they can raise. Many have argued that, by relaxing these credit constraints, reforms that strengthen...
Persistent link: https://www.econbiz.de/10010849614
We study the effects of globalization on risk sharing and welfare. Like previous literature, we assume that countries cannot commit to repay their debts. Unlike previous literature, we assume that countries cannot discriminate between domestic and foreign creditors when repaying their debts....
Persistent link: https://www.econbiz.de/10005042676
We present a model of sovereign debt in which, contrary to conventional wisdom, government defaults are costly because they destroy the balance sheets of domestic banks. In our model, better financial institutions allow banks to be more leveraged, thereby making them more vulnerable to sovereign...
Persistent link: https://www.econbiz.de/10005103305