After conducting the first study of secondary trading in structured credit products, the authors report that the majority of products did not trade even once during the 21-month sample. Execution costs averaged 24 bps when trades occurred and were considerably higher for products with a greater...

The purpose of this paper is to model differential rates over residual information sets, so as to shape transactional algebras into operational grounds. Firstly, simple differential rates over residual information sets are introduced by taking advantage of finite algebras of sets. Secondly,...

We derive invariance relationships for a dynamic infinite-horizon model of market microstructure with risk-neutral informed trading,noise trading,marketmaking, and endogenous production of information. Invariance relationships for bet sizes and transaction costs are obtained under the assumption...

We derive invariance relationships in a dynamic, infinite-horizon, equilibrium model of adverse selection with risk-neutral informed traders, noise traders, market makers, and with endogenous information production. The model solution depends on two state variables: stock price and...

A risk-averse agent hedges her exposure to a non-tradable risk factor U using a correlated traded asset S and accounts for the impact of her trades on both factors. The effect of the agent's trades on U is referred to as cross-impact. By solving the agent's stochastic control problem, we obtain...

This article is to show a paradox in the mean variance model for portfolio selection when the transaction costs are included. While a transaction cost decreases the mean of the rate of return of an investment, it also decreases its variance. Thus, for individuals with strong risk aversion, it is...

Appendix A demonstrates an error in the Genotte and Jung (1994) solution; Appendix B presents the Hamilton-Bellman-Jacoby equation in continuous time; Appendix C presents the exact solution in discrete time; Appendix D presents a numerical solution to the Liu and Loewenstein (2007) problem

In order to maintain the function of a decentralized financial system like Bitcoin, transaction fees are offered to engage miners in the transaction confirmation process. This paper investigates the effect of miner competition on the equilibrium transaction fees. We develop a game-theoretic...

This paper investigates the direct link between institutional investors' trading activity and comovement in stock liquidity using data on actual institutional investors' trades. We fi nd strong empirical evidence that stocks that are highly traded by institutions exhibit commonality in...