Showing 1 - 10 of 68
In this paper we estimate the propagation of liquidity shocks through interbank markets when the information about the underlying credit network is incomplete.We show that techniques such as Maximum Entropy currently used to reconstruct credit networks severely underestimate the risk of...
Persistent link: https://www.econbiz.de/10013120038
We relax the strong rationality assumption for the agents in the paradigmatic Kyle model of price formation, thereby reconciling the framework of asymmetrically informed traders with the Adaptive Market Hypothesis, where agents use inductive rather than deductive reasoning. Building on these...
Persistent link: https://www.econbiz.de/10014082287
The vast majority of recent studies in market impact assess each product individually, and the interactions between their order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible contagion effects. Transactions mediate a significant part...
Persistent link: https://www.econbiz.de/10012983576
We reconsider the multivariate Kyle model in a risk-neutral setting with a single, perfectly informed rational insider and a rational competitive market maker, setting the price of n correlated securities. We prove the unicity of a symmetric, positive definite solution for the impact matrix and...
Persistent link: https://www.econbiz.de/10012916397
This paper is devoted to the important yet unexplored subject of crowding effects on market impact, that we call co-impact. Our analysis is based on a large database of metaorders by institutional investors in the U.S. equity market. We find that the market chiefly reacts to the net order flow...
Persistent link: https://www.econbiz.de/10012920646
Persistent link: https://www.econbiz.de/10013490934
Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact relevant to explain the variance of price returns. We show...
Persistent link: https://www.econbiz.de/10014354338
We compare the predictions of the stationary Kyle model, a microfounded multi-step linear price impact model in which market prices forecast fundamentals through information encoded in the order flow, with those of the propagator model, a purely data-driven model in which trades mechanically...
Persistent link: https://www.econbiz.de/10014361491
Persistent link: https://www.econbiz.de/10011588193
Crowding is most likely an important factor in the deterioration of strategy performance, the increase of trading costs and the development of systemic risk. We study the imprints of crowding on both anonymous market data and a large database of metaorders from institutional investors in the...
Persistent link: https://www.econbiz.de/10012844276