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LIBOR: Origins, economics, crisis, scandal, and reform

Hou, David; Skeie, David - 2014

The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans....

Persistent link: https://www.econbiz.de/10011340948

Liquidity, volatility, and flights to safety in the US treasury market: Evidence from a new class of dynamic order book models

Engle, Robert; Fleming, Michael; Ghysels, Eric; Nguyen, … - 2012

We propose a new class of dynamic order book models that allow us to 1) study episodes of extreme low liquidity and 2) unite liquidity and volatility in one framework through which their joint dynamics can be examined. Liquidity and volatility in the U.S. Treasury securities market are analyzed...

Persistent link: https://www.econbiz.de/10010333574

Is size everything?

Antill, Samuel; Sarkar, Asani - 2018

We examine sources of systemic risk (threshold size, complexity, and interconnectedness) with factors constructed from equity returns of large financial firms, after accounting for standard risk factors. From the factor loadings and factor returns, we estimate the implicit government subsidy for...

Persistent link: https://www.econbiz.de/10012144707

Informational contagion in the laboratory

Cipriani, Marco; Guarino, Antonio; Guazzarotti, Giovanni; … - 2015

We study the informational channel of financial contagion in the laboratory. In our experiment, two markets with … from the market that opens first. As a result, we observe financial contagion in the laboratory: Indeed, the correlation … between asset prices is very close to that predicted by the theory. Finally, as theory predicts, there is no contagion when …

Persistent link: https://www.econbiz.de/10011340963

Financial amplification of foreign exchange risk premia

Adrian, Tobias; Etula, Erkko; Groen, Jan J. J. - 2010

Theories of systemic risk suggest that financial intermediaries' balance-sheet constraints amplify fundamental shocks. We provide supportive evidence for such theories by decomposing the U.S. dollar risk premium into components associated with macroeconomic fundamentals and a component...

Persistent link: https://www.econbiz.de/10010287155

Order flow segmentation and the role of dark trading in the price discovery of U.S. treasury securities

Fleming, Michael; Nguyen, Giang - 2013

This paper studies the workup protocol, a unique trading feature in the U.S. Treasury securities market that resembles a mechanism for discovering dark liquidity. We quantify its role in the price formation process in a model of the dynamics of price and segmented order flow induced by the...

Persistent link: https://www.econbiz.de/10010333609

Did liquidity providers become liquidity seekers?

Choi, Jaewon; Shachar, Or - 2013

The misalignment between corporate bond and credit default swap (CDS) spreads (i.e., CDSbond basis) during the 2007-09 financial crisis is often attributed to corporate bond dealers shedding off their inventory, right when liquidity was scarce. This paper documents evidence against this...

Persistent link: https://www.econbiz.de/10010333633

Nonlinearity and flight to safety in the risk-return trade-off for stocks and bonds

Adrian, Tobias; Crump, Richard; Vogt, Erik - 2015

We document a highly significant, strongly nonlinear dependence of stock and bond returns on past equity-market volatility as measured by the VIX. We propose a new estimator for the shape of the nonlinear forecasting relationship that exploits additional variation in the cross section of...

Persistent link: https://www.econbiz.de/10011340951

Intraday market making with overnight inventory costs

Adrian, Tobias; Capponi, Agostino; Vogt, Erik; Zhang, … - 2016

The share of market making conducted by high-frequency trading (HFT) firms has been rising steadily. A distinguishing feature of HFTs is that they trade intraday, ending the day flat. To shed light on the economics of HFTs, and in a departure from existing market-making theories, we model an HFT...

Persistent link: https://www.econbiz.de/10011796442

Tick size change and market quality in the U.S. treasury market

Fleming, Michael J.; Nguyen, Giang H.; Ruela, Francisco - 2019

This paper studies a recent tick size reduction in the U.S. Treasury securities market and identifies its effects on the market's liquidity and price efficiency. Employing difference-indifference regressions, we find that the bid-ask spread narrows significantly after the change, even for large...

Persistent link: https://www.econbiz.de/10012144729