New Economics Papers
on Market Microstructure
Issue of 2010‒10‒16
three papers chosen by
Thanos Verousis
  1. New approximations in local volatility models By Emmanuel Gobet; Ali Suleiman
  2. The 2007-09 financial crisis and bank opaqueness By Mark J. Flannery; Simon H. Kwan; Mahendrarajah Nimalendran
  3. Internalization, clearing and settlement and stock market liquidity. By Degryse, Hans; Van Achter, Marc; Wuyts, Gunther
  1. By: Emmanuel Gobet (CMAP - Centre de Mathématiques Appliquées - Ecole Polytechnique - Polytechnique - X - CNRS : UMR7641); Ali Suleiman (ENSIMAG - École nationale supérieure d'informatique et de mathématiques appliquées - Université Joseph Fourier - Grenoble I)
    Abstract: For general time-dependent local volatility models, we propose new approximation formulas for the price of call options. This extends previous results of [BGM10b] where stochastic expansions combined with Malliavin calculus were performed to obtain approximation formulas based on the local volatility At The Money. Here, we derive alternative expansions involving the local volatility at strike. Averaging both expansions give even more accurate results. Approximations of the implied volatility are provided as well.
    Date: 2010–10–05
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00523369_v1&r=mst
  2. By: Mark J. Flannery; Simon H. Kwan; Mahendrarajah Nimalendran
    Abstract: Doubts about the accuracy with which outside investors can assess a banking firm’s value motivate many government interventions in the banking market. The recent financial crisis has reinforced concerns about the possibility that banks are unusually opaque. Yet the empirical evidence, thus far, is mixed. This paper examines the trading characteristics of bank shares over the period from January 1990 through September 2009. We find that bank share trading exhibits sharply different features before vs. during the crisis. Until mid-2007, large (NYSE-traded) banking firms appear to be no more opaque than a set of control firms, and smaller (NASD-traded) banks are, at most, slightly more opaque. During the crisis, however, both large and small banking firms exhibit a sharp increase in opacity, consistent with the policy interventions implemented at the time. Although portfolio composition is significantly related to market microstructure variables, no specific asset category(s) stand out as particularly important in determining bank opacity.
    Keywords: Banks and banking ; Stock market ; Financial crises
    Date: 2010
    URL: http://d.repec.org/n?u=RePEc:fip:fedfwp:2010-27&r=mst
  3. By: Degryse, Hans; Van Achter, Marc; Wuyts, Gunther
    Date: 2010
    URL: http://d.repec.org/n?u=RePEc:ner:leuven:urn:hdl:123456789/276446&r=mst
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