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on Market Microstructure |
| By: | Castro, C; Romero, M; Vélez, S |
| Abstract: | Simulations and empirical studies suggest that incorporating a discontinuous jump process in asset pricing models improve volatility forecasting, pricing of instruments, and hedging positions in a portfolio. In this paper we analyze high frequency market data of Colombian sovereign bonds in order to study the presence or absence of discontinuities in the price generating process. We find that Colombian sovereign debt experiments jumps across all maturities but with different frequencies, in particular, we do not find that long term bonds jump less frequently than short term bonds. Furthermore, bonds with closer maturities cojump in greater magnitude than those with a greater distance between them. Finally, we find significant day-of-the-week effects, as well as an important increase in the jump frequency due to surprises in economic information related to US monetary policy and no effect due to direct monetary policy announcements in Colombia or the US. |
| Keywords: | Jumps, Realized Variance, High Frequency, Preferred habitattheory, Monetary Policy Announcements |
| JEL: | G12 E43 C58 |
| Date: | 2020–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:018098&r=all |
| By: | Kapar, Burcu; Iori, Giulia; Gabbi, Giampaolo; Germano, Guido |
| Abstract: | We present a study of the European electronic interbank market of overnight lending (e-MID) before and after the beginning of the financial crisis. The main goal of the paper is to explain the structural changes of lending/borrowing features due to the liquidity turmoil. Unlike previous contributions that focused on banks’ dependent and macro information as explanatory variables, we address the role of banks’ behaviour and market microstructure as determinants of the credit spreads. We show that all banks experienced significant variations in their liquidity costs due to the sensitivity of interbank rates to the timing and side of trades. We argue that, while larger banks did experience better funding conditions after the crisis, this was not just a consequence of the “too big to fail” perception of the market. Larger banks have been able to play more strategically when managing their liquidity by taking advantage of the changing market microstructure. |
| Keywords: | interbank lending; market microstructure; subprime crisis; liquidity manahement |
| JEL: | F3 G3 |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100467&r=all |