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Information Percolation in Segmented Markets
Duffie, Darrell - 2011
We calculate equilibria of dynamic double-auction markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and offers. Investors are segmented into groups that differ with respect to characteristics determining information...
Persistent link: https://www.econbiz.de/10013121588
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Aggregate Implications of Micro Asset Market Segmentation
Edmond, Chris - 2010
This paper develops a consumption-based asset pricing model to explain and quantify the aggregate implications of a frictional financial system, comprised of many financial markets partially integrated with one-another. Each of our micro financial markets is inhabited by traders who are...
Persistent link: https://www.econbiz.de/10013151364
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The Dynamics of Financially Constrained Arbitrage
Gromb, Denis - 2015
We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing so provide liquidity to investors. A collateral...
Persistent link: https://www.econbiz.de/10013027277
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Displaced Capital
Ramey, Valerie A.; Shapiro, Matthew D. - 2021
This paper studies the efficiency with which physical capital can be reallocated across sectors. It presents a model of a firm selling specialized capital in a thin resale market. The model predicts that the selling price depends not only on the sectoral specificity of capital, but also on the...
Persistent link: https://www.econbiz.de/10013220526
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Money, Interest Rates, and Exchange Rates with Endogenously Segmented Asset Markets
Alvarez, Fernando; Atkeson, Andrew; Kehoe, Patrick J. - 2021
This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only...
Persistent link: https://www.econbiz.de/10013220784
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Oligopoly in Segmented Markets
Ben-Zvi, Shmuel; Helpman, Elhanan - 2022
We propose a new solution concept for a game among oligopolists that simultaneously compete in several segmented markets. The motivation for this solution comes from international trade, but it also has applications in other areas. It is based on a three-stage extension of the two-stage...
Persistent link: https://www.econbiz.de/10013324113
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Valuation of Variance Forecast with Simulated Option Markets
Engle, Robert F. - 2010
An appropriate metric for the success of an algorithm to forecast the variance of the rate of return on a capital asset could be the incremental profit from substituting it for the next best alternative. We propose a framework to assess incremental profits for competing algorithms to forecast...
Persistent link: https://www.econbiz.de/10013138666
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Security Baskets and Index-Linked Securities
Gorton, Gary B. - 2010
Security baskets and index-lined securities are securities whose values are functions of the cash flows or values of other assets. Creation of these "composite" securities would seem to be redundant since investors can cost1ess1y replicate them. In this paper we study the existence and optimal...
Persistent link: https://www.econbiz.de/10013138948
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Should Derivatives Be Privileged in Bankruptcy?
Bolton, Patrick - 2011
Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic …, even though this risk could be borne more efficiently by derivative counterparties. In addition, because super …-senior derivatives dilute existing creditors, they may lead firms to take on derivative positions that are too large from a social …
Persistent link: https://www.econbiz.de/10013118249
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FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets
Levich, Richard M. - 2012
The Global Financial Crisis initiated a period of market turbulence and increased counterparty risk for financial institutions. Even though the Dodd-Frank Act is likely to exempt interbank foreign exchange trading from a central counterparty mandate, market participants have the option to trade...
Persistent link: https://www.econbiz.de/10013103054