In this paper we empirically analyze and compare the Libor and Swap Market Models, developed by Brace, Gatarek and Musiela (1997) and Jamshidian (1997), using panel data on prices of US caplets and swaptions. A Libor Market Model can directly be calibrated to observed prices of caplets, whereas...

We empirically compare Libor and Swap Market Models for the pricing of interest rate derivatives, using panel data on prices of US caplets and swaptions. A Libor Market Model can directly be calibrated to observed prices of caplets, whereas a Swap Market Model is calibrated to a certain set of...

Cap and swaption prices contain information on interest rate volatilities and correlations. In this paper, we examine whether this information in cap and swaption prices is consistent with realized movements of the interest rate term structure. To extract an option-implied interest rate...

We derive an equilibrium asset pricing model incorporating liquidity risk, derivative assets, and short-selling due to hedging of non-traded risk. We show that, both for positive-net-supply assets and derivatives, the sign of liquidity effects depends on investor heterogeneity in non-traded risk...

We analyze the resiliency of a pure limit order market by investigating the limit order book (bid and ask prices, spreads, depth and duration), order flow and transaction prices in a window of best limit updates and transactions around aggressive orders (orders that move prices). We find strong...

In this paper, we employ a registry of legal insider trading for Dutch listed firms to investigate the information content of the trades by corporate insiders. Using the standard event-study methodology, we examine short-term stock price behavior around trades. We find that purchases are...

We study sovereign yield dynamics and order flow in the largest euro-area treasury markets. We exploit unique transaction data to explain daily yield changes in the ten-year government bonds of Italy, France, Belgium, and Germany. We use a state space model to decompose these changes into (i) a...

We study the microstructure of the MTS Global Market bond trading system, which is the largest interdealer trading system for Eurozone government bonds. Using a unique new dataset we find that quoted and effective spreads are related to maturity and trading intensity. Securities can be traded on...

The objective of this paper is twofold. First, the paper develops a class of models of the term structure of interest rates, in the Heath, Jarrow and Morton (1992) framework, with dynamics characterized by the evolution of a small set of state variables. Second, the paper exploits this...

The average firm going public or issuing new equity underperforms the market in the long run. This underperformance could be related to the endogeneity of the number of new issues, if new issues cluster after periods of high abnormal returns on new issues. In such a case, ex-post measures of new...