This paper examines how risk in trading activity can affect the volatility of asset prices. We look for this relationship in the behavior of interest rate swap spreads and in the volume and interest rates of repurchase contracts. Specifically, we focus on convergence trading, in which...

[...]This article examines how the nature and characteristics ofhedge funds may generate “market failures” that make CCRMfor exposures to hedge funds intrinsically more difficult tomanage, both for the individual firm and for policymakersconcerned with systemic risk. We put forward no...

[...]This article analyzes empirical evidence on the limits ofarbitrage in the interest rate swap market as well as on howtrading risk can affect market liquidity and amplify shocks inasset prices. We study these issues in terms of the behavior ofthe interest rate swap spread—the spread...

[...]In this article, we study the influence of market liquidity anddynamic trading strategies on the short-run dynamics of theyield curve. Specifically, we focus on the recent behavior ofintermediate-maturity interest rates for evidence of marketliquidity effects arising from the hedging of...

[...]Our first suggestion is to reduce the fragmentation oftrading in STRIPS by assigning the same CUSIP number to allSTRIPS maturing on a common date—thus making thoseSTRIPS fungible with each other. In addition to enhancing theliquidity of the STRIPS market, this action would ensure...