We study how high-frequency traders (HFTs) strategically decide their speed level in a market with a random speed bump. If HFTs recognize the market impact of their speed decision, they perceive a wider bid-ask spread as an endogenous upward-sloping cost of being faster. We find that the speed...

In this paper, we examine the value-enhancing effect of corporate social responsibility (CSR) in the presence of product market competition. Using a comprehensive sample of 22,527 firm-year observations from 62 countries, we find that the value-enhancing effect of CSR is dominant in the...

A rich history of theoretical models in finance shows that speculation can lead to overpricing and price bubbles. We provide evidence that, indeed, individual speculative behavior fuels overpricing in (experimental) asset markets. In a first step, we elicit individual speculative behavior in a...

We investigate the role of a class of alternative market structures known as electronic crossing networks or "dark pools''. Relative to traditional "lit'' markets, dark pools offer investors the trade-off of reduced transaction costs in exchange for greater uncertainty of trade. Our paper...

This paper studies over-the-counter (OTC) trading in the unsecured interbank market for euro funds. The goal of our analysis is to identify the determinants of the probability of trading, the bilateral rate and the quantity exchanged during the European sovereign debt crisis. We show how the...

Interest rate instruments are typically priced by creating a non-arbitrage replicating portfolio in a risk-neutral framework. Bespoke instruments with timing, quanto and other adjustments often present arbitrage opportunities, particularly in complete markets where the difference can be...

Interest rate swaps are an actively traded product in the financial marketplace and are popular for hedging mortgage and corporate loan exposures against rises in interest rates. Asset swaps on the other hand provide a form of asset financing, where investors borrow funds to purchase an asset,...

This paper argues that market makers' presence is uncertain over any short time interval, as their operations are subject to constraints of, e.g., capital, technology, and attention. Such uncertain market making implies a random pricing equilibrium with new implications on market quality. A...

Competition for order flow is widely documented for U.S. markets, but is a relatively new phenomenon in European equities trading. Only with the Markets in Financial Instruments Directive, which went into effect in November 2007, did new trading venues emerge in Europe that for the first time...

We show that when a continuous dark pool is added to a limit order book that opens illiquid, book and consolidated fill rates and volume increase, but spread widens, depth declines and welfare deteriorates. The adverse effects on market quality and welfare are mitigated when book-liquidity...