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on Market Microstructure |
| By: | Bilan, Andrada; Ongena, Steven; Pancaro, Cosimo |
| Abstract: | Can banks trade credit default swaps (CDSs) referenced on their current corporate clients at competitive prices, or are banks penalized for potentially holding private information? To answer this question we merge CDS trades reported under the European Market Infrastructure Regulation (EMIR) with syndicated loans from DealScan, and compare the prices on similar CDSs that the same dealer offers to banks and to other investors. We find that banks lending to a corporation purchase CDSs on this corporation at lower prices, and that, after trading with banks, dealers can earn higher margins on these CDSs when trading with other investors. Our findings suggest that banks hold valuable private information which is shared in their trades with dealers. Dealers then disseminate this information to financial markets. JEL Classification: G14, G21, G23 |
| Keywords: | banks, credit derivatives, EMIR, price discovery, syndicated loans |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20232818&r=mst |
| By: | Cartuyvels, Jacques (Université catholique de Louvain, LIDAM/CORE, Belgium); Bertrand, Gilles; Papavasiliou, Anthony (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | The next phase of electricity markets integration in Europe will see the introduction of pan-European balancing platforms, MARI and PICASSO, for the trading of manual and automatic frequency restoration reserve. This paper provides an analytical framework for the study of pricing asymmetries between European member states in this context. The pricing asymmetries are due to balancing incentive components and consist of the unilateral introduction by a member state of either (i) an adder on the imbalance price and balancing price, (ii) an adder on the imbalance price solely, or (iii) the introduction of a real-time price for the trading of real-time balancing capacity. Our analytical framework allows us to characterize the optimal bidding strategy of flexible assets under the different designs and to derive the resulting equilibria. Our analysis demonstrates that adders without the trading of balancing capacity create inefficiencies by distorting the merit order and tend to be detrimental to the member state that introduces it. |
| Keywords: | Balancing market ; cross-border balancing ; frequency restoration reserve ; real-time market for reserve |
| Date: | 2023–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2023009&r=mst |
| By: | Stanis{\l}aw Dro\.zd\.z; Jaros{\l}aw Kwapie\'n; Marcin W\k{a}torek |
| Abstract: | In relation to the traditional financial markets, the cryptocurrency market is a recent invention and the trading dynamics of all its components are readily recorded and stored. This fact opens up a unique opportunity to follow the multidimensional trajectory of its development since inception up to the present time. Several main characteristics commonly recognized as financial stylized facts of mature markets were quantitatively studied here. In particular, it is shown that the return distributions, volatility clustering effects, and even temporal multifractal correlations for a few highest-capitalization cryptocurrencies largely follow those of the well-established financial markets. The smaller cryptocurrencies are somewhat deficient in this regard, however. They are also not as highly cross-correlated among themselves and with other financial markets as the large cryptocurrencies. Quite generally, the volume V impact on price changes R appears to be much stronger on the cryptocurrency market than in the mature stock markets, and scales as $R(V) \sim V^{\alpha}$ with $\alpha \gtrsim 1$. |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2305.05751&r=mst |