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Inference, arbitrage, and asset price volatility

Adrian, Tobias (contributor) - 2004 - [Elektronische Ressource], Rev. February 2008

, informed investors, and noise traders. Arbitrageurs face a trade-off between arbitrage and inference: they would like to buy … assets in response to temporary price declines (the arbitrage effect) but sell when prices decline permanently (the inference … effect). In equilibrium, the presence of arbitrageurs increases volatility when the inference effect dominates the arbitrage …

Persistent link: https://www.econbiz.de/10002101431

Intermediaries as information aggregators: an application to U.S. treasury auctions

Boyarchenko, Nina; Veldkamp, Laura; Lucca, David O. - Federal Reserve Bank of New York - 2015

According to most theories of financial intermediation, intermediaries diversify risk, transform maturity or liquidity, and screen or monitor borrowers. In U.S. Treasury auctions, none of these rationales apply. Intermediaries submit their customer bids without transforming liquidity or...

Persistent link: https://www.econbiz.de/10011264950

Trading risk and volatility in interest rate swap spreads

Kambhu, John (contributor) - 2004 - [Elektronische Ressource]

This paper examines how risk in trading activity can affect the volatility of asset prices. We look for this relationship in the behavior of interest rate swap spreads and in the volume and interest rates of repurchase contracts. Specifically, we focus on convergence trading, in which...

Persistent link: https://www.econbiz.de/10001936329

The 2015 economic outlook and the implications for monetary policy

Dudley, William - Federal Reserve Bank of New York - 2014

Remarks at Bernard M. Baruch College, New York City.

Persistent link: https://www.econbiz.de/10011093777

Betting against beta (and gamma) using government bonds

Durham, J. Benson - Federal Reserve Bank of New York - 2015

Purportedly consistent with “risk parity” (RP) asset allocation, recent studies document compelling “low risk” trading strategies that exploit a persistently negative relation between Sharpe ratios (SRs) and maturity along the U.S. Treasury (UST) term structure. This paper extends this...

Persistent link: https://www.econbiz.de/10011123661

Arbitrage-free models of stocks and bonds

Durham, J. Benson - Federal Reserve Bank of New York - 2013

A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and …

Persistent link: https://www.econbiz.de/10010735679

Another view on U.S. Treasury term premiums

Durham, J. Benson - Federal Reserve Bank of New York - 2013

The consensus suggests that subdued nominal U.S. Treasury yields on balance since the onset of the global financial crisis primarily reflect exceptionally low, if not occasionally negative, term premiums as opposed to low anticipated short rates. Depressed term premiums plausibly owe to...

Persistent link: https://www.econbiz.de/10010735681

A leverage-based measure of financial instability

Borowiecki, Karol Jan; Tepper, Alexander - Federal Reserve Bank of New York - 2014

hedge fund Long-Term Capital Management. We find that a forced liquidation of the fund threatened to destabilize some …

Persistent link: https://www.econbiz.de/10010890135

Restoring confidence in reference rates

Dudley, William - Federal Reserve Bank of New York - 2014

Remarks at the Salomon Center for the Study of Financial Institutions, New York University Stern School of Business, New York City.

Persistent link: https://www.econbiz.de/10010933947

Momentum and the term structure of interest rates

Durham, J. Benson - Federal Reserve Bank of New York - 2013

Gaussian arbitrage-free affine term structure models. However, substantial variance remains unexplained, the betas are less …

Persistent link: https://www.econbiz.de/10011027211