Download or read book Liquidity Shocks in Over the Counter Markets written by Ingrid Kudlik and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Crisis and Liquidity in Over the counter Markets written by Ricardo Lagos and published by . This book was released on 2009 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the efficiency of dealers' liquidity provision and the desirability of policy intervention in over-the-counter (OTC) markets during crises. Our theory emphasizes two key frictions in OTC markets: finding counterparties takes time, and trade is bilateral, with quantities and prices determined by bargaining. We model a crisis as a negative shock to investors' asset demands that lasts until a random recovery time. In this context, dealers can provide liquidity to outside investors by acting as counterparties in trades and by accumulating asset inventories. We find that, when frictions are severe, even well capitalized dealers may not find it optimal to accumulate inventories, given that investors choose asset positions that require small reallocations. In such circumstances, the market allocative efficiency can increase if the government steps in, purchases private assets on its own account, and resells them when the economy recovers.
Download or read book Crises and liquidity in over the counter markets written by Ricardo A. Lagos and published by . This book was released on 2009 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the efficiency of dealers' liquidity provision and the desirability of policy intervention in over-the-counter (OTC) markets during crises. Our theory emphasizes two key frictions in OTC markets: finding counterparties takes time, and trade is bilateral, with quantities and prices determined by bargaining. We model a crisis as a negative shock to investors' asset demands that lasts until a random recovery time. In this context, dealers can provide liquidity to outside investors by acting as counterparties in trades and by accumulating asset inventories. We find that, when frictions are severe, even well capitalized dealers may not find it optimal to accumulate inventories, given that investors choose asset positions that require small reallocations. In such circumstances, the market allocative efficiency can increase if the government steps in, purchases private assets on its own account, and resells them when the economy recovers.
Download or read book Dark Markets written by Darrell Duffie and published by Princeton University Press. This book was released on 2012-01-08 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book offers a concise introduction to OTC markets by explaining key conceptual issues and modeling techniques, and by providing readers with a foundation for more advanced subjects in this field.
Download or read book Valuation in Over the counter Markets written by Darrell Duffie and published by . This book was released on 2006 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide the impact on asset prices of search-and-bargaining frictions in over-the-counter markets. Under certain conditions, illiquidity discounts are higher when counterparties are harder to find, when sellers have less bargaining power, when the fraction of qualified owners is smaller, or when risk aversion, volatility, or hedging demand are larger. Supply shocks cause prices to jump, and then "recover" over time, with a time signature that is exaggerated by search frictions. We discuss a variety of empirical implications.
Download or read book Market Liquidity written by Thierry Foucault and published by Oxford University Press. This book was released on 2023 with total page 531 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Download or read book Directed Search in Over the counter Markets Crises written by Santiago Franco Tabares and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I study optimal liquidity provision by dealers in Over-the-Counter (OTC) markets during crises. I develop a two-sided asset market in which all trades are intermediated by dealers. I model a crisis as an aggregate shock that reduces investor's marginal utilities, creating a large but temporary selling pressure. My contribution to the literature is twofold: 1) in the model, the rate of contact between dealers and investors is given by a matching function which may exhibit congestion and 2) dealers operate in two different markets (buying and selling) where they post the terms at which they execute trade and investors direct they search toward the dealers with the most attractive terms. I characterize the competitive equilibrium and show that when posting costs are sufficiently low, then dealers provide the socially optimal amount of liquidity.
Download or read book Inside and Outside Liquidity written by Bengt Holmstrom and published by MIT Press. This book was released on 2013-01-11 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.
Download or read book Liquidity and Asset Prices written by Yakov Amihud and published by Now Publishers Inc. This book was released on 2006 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.
Download or read book Pricing and Liquidity in Over the Counter Markets written by Oliver Randall and published by . This book was released on 2015 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: I show that if dealers are averse to holding inventory, then prices, liquidity, and dealers' inventory positions depend on inventory costs in negotiated over-the-counter markets. The solution to my dynamic equilibrium model rationalizes the following stylized facts in the US corporate bond market:(i) a reduction in dealers' inventories during crises;(ii) a reduction in average trade size since the onset of the financial crisis and tighter regulatory environment;(iii) better prices for customers to buy than sell in the financial crisis;(iv) a generally negative relationship between transaction costs and trade size.The results inform debate on the Volcker Rule.
Download or read book Crises and Liquidity in Over the Counter Markets written by and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Commonality in Liquidity written by Chitru S. Fernando and published by . This book was released on 2002 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Over the counter Market Liquidity and Securities Lending written by Nathan Foley-Fisher and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Trade Delay Liquidity and Asset Prices in Over the Counter Markets written by Anton Tsoy and published by . This book was released on 2018 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: In over-the-counter markets, the presence of two frictions is central to determine prices, liquidity, and efficiency: the search friction reflected in how long it takes to find a trading opportunity and the bargaining friction reflected in how promptly gains from trade are realized once the opportunity is identified. This paper captures both frictions by introducing an asset-specific trade delay into a standard search-and-bargaining model. For both exogenous and endogenous specifications of delay, the set of traded assets and the dependence of asset prices and spreads on default risk, liquidity, and market conditions are determined in equilibrium. The proposed model with endogenous delay has several implications. First, it offers a novel testable prediction: for assets within the same credit rating class, the liquidity is U-shaped in quality. Assets closer to the extremes of the quality range are more liquid, while assets in the middle of the quality range may be not traded at all. This is in contrast with a monotone relation in models with asymmetric information. Second, this model shows that the reduction in search and bargaining frictions may have opposite effects on market liquidity which is reflected in the range of traded assets. Finally, it establishes a connection between market uncertainty about the asset payoff and market liquidity. This link sheds light on the role of transparency in over-the-counter markets and explains the occurrence of dried-up liquidity and flights-to-quality during periods of increased market uncertainty.
Download or read book Poor s Ratings written by and published by . This book was released on 1926 with total page 608 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Measuring Liquidity in Financial Markets written by Abdourahmane Sarr and published by International Monetary Fund. This book was released on 2002-12 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.
Download or read book A Structural Model of Liquidity in Over the counter Markets written by Jamie Coen and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
