The Role of Market-Maker/Dealer Inventories in the Price Formation Process PDF Download
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Author: Evelyn Rill
Publisher:
ISBN: 9783668080317
Category :
Languages : en
Pages : 40
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Book Description
Bachelor Thesis from the year 2015 in the subject Business economics - Economic Policy, grade: 1,3, University of Frankfurt (Main) (Faculty of Economics and Business Administration), course: Chair of Corporate Finance, language: English, abstract: Due to the importance of inventories and the fact that asymmetric information models are extensively discussed in literature, this thesis exclusively focuses on inventory control models and provides a survey of theory and empirical results on the role of inventory in the price formation process. Because most of the relevant literature is based on the U.S. exchange market, this thesis is mainly confined on inventory control of specialists on the New York Stock Exchange (NYSE) and of dealers on the National Association of Securities Dealers (NASDAQ). To understand the costs of holding inventory, Section 2 introduced three important drivers of inventory: capital constraints, liquidity and volatility. Section 3 summarises the effect of market maker inventory and its costs on liquidity and how this affects the bid-ask spread. In Section 4, the impact of inventory on asset prices, especially of inventory levels, is discussed in more detail. Section 5 briefly turns to changes in market structure and how they affect the role of traditional market makers and their inventories. Section 6 finally concludes.
Author: Evelyn Rill
Publisher:
ISBN: 9783668080317
Category :
Languages : en
Pages : 40
Get Book Here
Book Description
Bachelor Thesis from the year 2015 in the subject Business economics - Economic Policy, grade: 1,3, University of Frankfurt (Main) (Faculty of Economics and Business Administration), course: Chair of Corporate Finance, language: English, abstract: Due to the importance of inventories and the fact that asymmetric information models are extensively discussed in literature, this thesis exclusively focuses on inventory control models and provides a survey of theory and empirical results on the role of inventory in the price formation process. Because most of the relevant literature is based on the U.S. exchange market, this thesis is mainly confined on inventory control of specialists on the New York Stock Exchange (NYSE) and of dealers on the National Association of Securities Dealers (NASDAQ). To understand the costs of holding inventory, Section 2 introduced three important drivers of inventory: capital constraints, liquidity and volatility. Section 3 summarises the effect of market maker inventory and its costs on liquidity and how this affects the bid-ask spread. In Section 4, the impact of inventory on asset prices, especially of inventory levels, is discussed in more detail. Section 5 briefly turns to changes in market structure and how they affect the role of traditional market makers and their inventories. Section 6 finally concludes.
Author: Evelyn Rill
Publisher: GRIN Verlag
ISBN: 3668080305
Category : Political Science
Languages : en
Pages : 40
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Book Description
Bachelor Thesis from the year 2015 in the subject Business economics - Economic Policy, grade: 1,3, University of Frankfurt (Main) (Faculty of Economics and Business Administration), course: Chair of Corporate Finance, language: English, abstract: Due to the importance of inventories and the fact that asymmetric information models are extensively discussed in literature, this thesis exclusively focuses on inventory control models and provides a survey of theory and empirical results on the role of inventory in the price formation process. Because most of the relevant literature is based on the U.S. exchange market, this thesis is mainly confined on inventory control of specialists on the New York Stock Exchange (NYSE) and of dealers on the National Association of Securities Dealers (NASDAQ). To understand the costs of holding inventory, Section 2 introduced three important drivers of inventory: capital constraints, liquidity and volatility. Section 3 summarises the effect of market maker inventory and its costs on liquidity and how this affects the bid-ask spread. In Section 4, the impact of inventory on asset prices, especially of inventory levels, is discussed in more detail. Section 5 briefly turns to changes in market structure and how they affect the role of traditional market makers and their inventories. Section 6 finally concludes.
Author: Richard K. Lyons
Publisher: MIT Press (MA)
ISBN:
Category : Business & Economics
Languages : en
Pages : 360
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Book Description
Explaining the puzzling behavior of exchange rates using models from microstructure finance and data from electronic trading.
Author: Maureen O'Hara
Publisher: John Wiley & Sons
ISBN: 0631207619
Category : Business & Economics
Languages : en
Pages : 310
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Book Description
Written by one of the leading authorities in market microstructure research, this book provides a comprehensive guide to the theoretical work in this important area of finance.
Author: Olivier Gueant
Publisher: CRC Press
ISBN: 1498725481
Category : Business & Economics
Languages : en
Pages : 302
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Book Description
This book is among the first to present the mathematical models most commonly used to solve optimal execution problems and market making problems in finance. The Financial Mathematics of Market Liquidity: From Optimal Execution to Market Making presents a general modeling framework for optimal execution problems-inspired from the Almgren-Chriss app
Author: Thierry Foucault
Publisher: Oxford University Press
ISBN: 0197542069
Category : Capital market
Languages : en
Pages : 531
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Book Description
"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"--
Author: Nikiforos T. Laopodis
Publisher: Taylor & Francis
ISBN: 1000506053
Category : Business & Economics
Languages : en
Pages : 767
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Book Description
Financial Economics and Econometrics provides an overview of the core topics in theoretical and empirical finance, with an emphasis on applications and interpreting results. Structured in five parts, the book covers financial data and univariate models; asset returns; interest rates, yields and spreads; volatility and correlation; and corporate finance and policy. Each chapter begins with a theory in financial economics, followed by econometric methodologies which have been used to explore the theory. Next, the chapter presents empirical evidence and discusses seminal papers on the topic. Boxes offer insights on how an idea can be applied to other disciplines such as management, marketing and medicine, showing the relevance of the material beyond finance. Readers are supported with plenty of worked examples and intuitive explanations throughout the book, while key takeaways, ‘test your knowledge’ and ‘test your intuition’ features at the end of each chapter also aid student learning. Digital supplements including PowerPoint slides, computer codes supplements, an Instructor’s Manual and Solutions Manual are available for instructors. This textbook is suitable for upper-level undergraduate and graduate courses on financial economics, financial econometrics, empirical finance and related quantitative areas.
Author: Yakov Amihud
Publisher: Now Publishers Inc
ISBN: 1933019123
Category : Business & Economics
Languages : en
Pages : 109
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Book Description
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.
Author: Larry Harris
Publisher: OUP USA
ISBN: 9780195144703
Category : Business & Economics
Languages : en
Pages : 664
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Book Description
Focusing on market microstructure, Harris (chief economist, U.S. Securities and Exchange Commission) introduces the practices and regulations governing stock trading markets. Writing to be understandable to the lay reader, he examines the structure of trading, puts forward an economic theory of trading, discusses speculative trading strategies, explores liquidity and volatility, and considers the evaluation of trader performance. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).
Author: Joel Hasbrouck
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209
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Book Description
The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.
