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on Market Microstructure |
| By: | Ross Starr (University of California, San Diego) |
| Abstract: | General equilibrium is investigated with N commodities deliverable at T dates traded spot and futures at ½ N 2T 3 dated commodity-pairwise trading posts. Trade is a resource-using activity recovering transaction costs through the spread between (bid) wholesale) and ask (retail) prices (pairwise rates of exchange). Budget constraints are enforced at each trading post separately implying demand for a carrier of value between trading posts and over time, commodity money (spot or futures). Trade in media of exchange and stores of value is the difference between gross and net inter-post trades. "Demand for 'money'" is stocks held for retrade. |
| Keywords: | Equilibrium, Money and Interest Rates, |
| Date: | 2008–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:2008-09&r=mst |
| By: | Song Han; Hao Zhou |
| Abstract: | We estimate the nondefault component of corporate bond yield spreads and examine its relationship with bond liquidity. We measure bond liquidity using intraday transactions data and estimate the default component using the term structure of credit default swaps spreads. With swap rate as the risk free rate, the estimated nondefault component is generally moderate but statistically significant for AA-, A-, and BBB-rated bonds and increasing in this order. With Treasury rate as the risk free rate, the estimated nondefault component is the largest in basis points for BBB-rated bonds but, as a fraction of yield spreads, it is the largest for AAA-rated bonds. We find a positive and significant relationship between the nondefault component and illiquidity for investment-grade bonds but no significant relationship for speculative-grade bonds. In addition, the nondefault component comoves with macroeconomic conditions--negatively with the Treasury term structure and positively with the stock market implied volatility. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-40&r=mst |
| By: | Wassim Daher; Leonard J. Mirman; Marc Santugini (IEA, HEC Montréal) |
| Abstract: | We study asymmetric information and the signaling role of prices in a noiseless and imperfectly competitive environment. Here, the price is determined by market forces. After describing the general model, we study information flows in applications of industrial organization and finance: a quantity-setting monopoly, Cournot oligopoly, and a model of choice and allocation of a risky asset. For each application, there is a unique signaling equilibrium in which the price conveys all the information. Moreover, the signaling equilibrium differs from the full information equilibrium.. |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0809&r=mst |