We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on informational efficiency, liquidity and volatility. In our sequential trading model there are price elastic noise traders and traders with private information of heterogeneous quality. We estimate the...

We assess the ability of an information aggregation mechanism that operates in the over-the-counter market for financial derivatives to reduce valuation uncertainty among market participants. The analysis is based on a unique dataset of price estimates for S&P 500 index options that major...

We develop a new methodology to estimate the impact of a financial transaction tax (FTT) on financial market outcomes. In our sequential trading model, there are price-elastic noise and informed traders. We estimate the model through maximum likelihood for a sample of sixty New York Stock...

Frontmatter -- Advance Praise for Reverse Stress Testing in Banking -- Acknowledgements -- Foreword -- Contents -- Part I: Fundamentals of Reverse Stress Testing -- 1 Reverse Stress Testing: A Versatile Thinking Tool -- 2 Reverse Stress Testing in Banks -- 3 Reverse Stress Testing: An Overview...

Theory on high-frequency traders (HFT) predicts that market liquidity for a security decreases in the number of HFT trading the security. We test this prediction by studying a new Canadian stock exchange, Alpha, that experienced the entry of 11 HFT firms over four years. Bid-ask spreads on Alpha...

We document low cross-sectional correlations between high-frequency market maker (MM) inventory positions, suggesting poor risk sharing. Using a unique data set on Canadian futures markets, a simple inventory cost estimate is 300% above the optimal benchmark. Our model explains how heterogeneity...

We analyze trading dynamics as successive high-frequency trading (HFT) firms begin to trade stocks in an equity market. Entrants compete with incumbents for volume, and there is crowding out. Earlier entry is associated with larger effects. After Passive HFT entry, incumbent spreads tighten....