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We analyze an overlapping generations economy where agents interact to share liquidity risk. We show that a pure exchange economy has excessive trade in equilibrium, and that intergenerational financial intermediaries reduce the number of interactions by catering to clienteles with uncorrelated...
Persistent link: https://www.econbiz.de/10010900731
We compare the call auction mechanisms of two major European stock exchanges. The French Euronext auctions disclose five levels of limit orders and have fixed ending times. The German Xetra auctions only disclose the virtual clearing price and volume, and have random ending times. For a sample...
Persistent link: https://www.econbiz.de/10010900742
Continuously monitored down-and-out calls and up-and-out puts have become very popular during the last decade, mainly because they can be interpreted as simple leveraged positions. Their deltas stay close to unity and their Greeks are small, particularly in low interest rate environments....
Persistent link: https://www.econbiz.de/10010900747
This paper analyzes market discipline in a many-bank economy where contagion and bank runs interact. We present a model with differently-informed depositors, where those depositors that are more informed have incentives to monitor banks’ investments. It is shown that when banks are...
Persistent link: https://www.econbiz.de/10011065688
Persistent link: https://www.econbiz.de/10006554765
An endless leverage certificate (ELC) is a novel retail structured product that gives its holder the right to claim the difference between the value of an underlying security and an interest accruing financing level. An ELC ceases to exist if the underlying breaches a contractual knockout level,...
Persistent link: https://www.econbiz.de/10005006361
We examine performance in publicly listed U.K. companies over a period that encompasses the issuance of the Cadbury Committee's "Code of Best Practice," which calls for the abolition of the combined CEO/COB position. We find that companies splitting the combined CEO/COB position to conform to...
Persistent link: https://www.econbiz.de/10005023969
A Kyle (1985) model with private information diffusion is used to examine the motivation to spread stock tips. An informed investor with limited investment capacity spreads imprecise rumors to an audience of followers. Followers trade on the advice and move the price. Due to the imprecision of...
Persistent link: https://www.econbiz.de/10005302667
We present an overlapping generations model with spatial separation and agents who face unsystematic liquidity risk. In a pure exchange economy, agents engage in life cycle portfolio rebalancing. In an intermediated economy, intergenerational banks or mutual funds cater to diversified clienteles...
Persistent link: https://www.econbiz.de/10008568501
This paper researches the microstructure of the price process after the IPO, to gain insight into the information aggregation process of secondary market trading. We investigate a sample of 2,040 US IPOs between 1993 and 2000 and find that it takes approximately one week for all IPO-related...
Persistent link: https://www.econbiz.de/10008755583