|
on Market Microstructure |
| By: | Ma, Richie R.; Serra, Teresa; Peterson, Brian G.; Irwin, Scott H. |
| Abstract: | Electronic trading allows traders to execute calendar spreads simultaneously rather than pairing two outright contracts. Through implied functionality, calendar spreads and outrights are tightly connected, reshaping liquidity provision in outright markets. We examine how the trading architecture of calendar spreads affects the trading outcomes for different groups of agricultural futures market participants. Using Chicago Mercantile Exchange (CME) intraday data, we focus on spread traders who rely on calendar spreads to meet their trading needs, and outright market makers. Counterfactual analyses show that calendar spreads improve execution quality and generate more informative signals about the futures term structure. Implied functionality increases adverse-selection risk borne by market makers, while leaving their gross revenues largely unchanged. Our findings highlight the trade-offs inherent in the current calendar-spread trading design. |
| Keywords: | Demand and Price Analysis, Marketing |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:asea26:404829 |
| By: | Coppola, Antonio; Krishnamurthy, Arvind; Xu, Chenzi |
| Abstract: | Drawing on the experiences of the historical Eurodollar market and recent Chinese dollar bond issuances traded outside U.S. jurisdiction at negative spreads to Treasurys, we examine the conditions under which a parallel offshore dollar financial system that circumvents Western sanctions may emerge. We propose a model in which currency use is driven by liquidity provision and safe bond supply. We characterize three equilibrium regimes: high convenience yields emerge in both the initial sanctions-driven region and the final liquidity-driven region, separated by an intermediate region. Transitions between equilibria depend on safe-asset supply and liquidity technologies, in addition to endogenous dynamic complementarities. |
| Keywords: | Sanctions; Liquidity |
| JEL: | F33 F36 G20 N24 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19894 |
| By: | Ying Chen; Hoa Nguyen; Julian Sester; Hoang Hai Tran; Yijiong Zhang |
| Abstract: | We study sequential decision making under evolving uncertainty in high-frequency financial markets, where changing market dynamics continually challenge static decision policies. We show that robustness has two economically meaningful dimensions: uncertainty tolerance, which determines how much uncertainty the decision maker allows, and action robustness, which governs how conservatively decisions respond. Robustness is not merely protection against model misspecification, but a state-dependent mechanism that reshapes sequential decision behaviors. Simulation and empirical evidence show that action robustness has a substantially larger impact than uncertainty tolerance. Moreover, excessive robustness may reduce profitability in illiquid markets by limiting execution opportunities. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.08291 |
| By: | Padhyoti, Yadav; Mugera, Amin; White, Benedict |
| Abstract: | Price transmission between distant markets is a measure of market performance, weighing the fairness of the distribution of market surplus among producers, traders, and consumers. We estimate price transmission from global wheat futures (CBOT and Euronext) to Australian regional wheat spot markets (Kwinana and Newcastle) using the Non-Linear Autoregressive Distributed Lag (NARDL) model. The NARDL captures non-linearity and asymmetric adjustments when price series are stationary or of mixed order at the level. The model is further extended into the Generalised Autoregressive Conditional Heteroskedasticity (GARCH) framework to account for time-varying volatility. The results reveal that price transmission from CBOT and Euronext futures to Kwinana is negatively asymmetric in both the short and long run, while it is symmetric to the Newcastle spot market. The export-oriented Kwinana market is highly concentrated, with a single major buyer, whereas the Newcastle market has multiple buyers and significant domestic demand. This study adds to the existing spatial price transmission literature, especially in the underexplored context of Australian grain markets. It also advances the econometric practices by integrating the NARDL framework with a GARCH specification to account for time-varying volatility in high-frequency time series data. |
| Keywords: | Marketing |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404540 |
| By: | Madarász, Kristóf; Pycia, Marek |
| Abstract: | A privately-informed buyer takes an action that impacts the distribution of information between her and the seller. The available actions differ in both content (what information is revealed and what remains hidden) and costs. For a large class of trading environments where buyers can choose from an arbitrary set of dynamic signal-generating processes and the costs of these processes can depend on the buyer’s private information, we establish a "cost-over-content" theorem: buyers will only choose least expensive processes. We explore implications for data trade, market power, and the power of setting a default information structure in trade regulation. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19902 |
| By: | Sweeting, Andrew; Tao, Xuezhen; Wang, Qian |
| Abstract: | We consider models of repeated oligopoly competition where firms set quantities and one or more firms have private information about their marginal costs. This structure gives rise to strategic incentives to signal information about costs using output choices in order to affect rivals' future outputs. Consistent with the standard intuition from reaction functions, strategic incentives with quantity-setting tend to lead to higher equilibrium output and lower equilibrium prices, which are the opposite changes to those observed in similar models where price-setting is assumed. We emphasize a more surprising, and to the best of our understanding novel, difference: the effects of strategic incentives in quantity-setting games remain substantial, or even become stronger, as market structure becomes less concentrated. In contrast, in price-setting games, we always find smaller effects in less concentrated markets. |
| Keywords: | Oligopoly; Asymmetric information; Signaling; Pooling equilibria; Separating equilibrium; Firm conduct; Pass-through |
| JEL: | L1 L13 L4 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19757 |
| By: | Strine, Joshua; Mallory, Mindy; Foster, Kenneth |
| Abstract: | This paper examines how price discovery between soybean crushing plants and river terminals evolved across three price regimes defined by the 2018–2020 US-China Trade War. Using daily cash prices from 37 crushing plants and 81 river terminals across Ohio, Indiana, Illinois, Minnesota, Iowa, and Missouri, we estimate which type of local buyer leads price adjustments in Midwestern soybean markets. We find that price discovery shifted from crushing plants toward river terminals over the study period, with the largest shift occurring after the trade war. Crushing plants have become persistent and less price-reactive buyers due to steady demand from the renewable diesel boom. River terminals, which are exposed to increasingly volatile global export demand, now lead local price adjustments. During the US-China Trade War, all cash prices lost their long-run relationship with nearby futures prices. The loss of long-run price relationships suggests that hedging with soybean futures may have been less effective and more volatile during the trade war, as the cash-futures relationship was disrupted. Following the trade war, the contribution of nearby futures to local price discovery declined, indicating that local delivery points are playing a larger role in price formation. The decrease in price discovery from futures markets coincides with a reduction in daily futures trading volume. These findings have implications for producers, grain merchandisers, and risk managers who rely on local price signals and futures markets for marketing and hedging decisions. |
| Keywords: | Demand and Price Analysis, Marketing |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:asea26:404813 |
| By: | Whelan, Karl |
| Abstract: | Following the work of Shin (1993) and Cain, Law and Peel (1997, 2001), several researchers have reported estimates of the fraction of money placed on sports betting by "insiders" with superior information to bookmakers. We show the method for estimating the fraction of insiders used in this research is only accurate under highly unrealistic conditions and that these estimates will tend to be positive in realistic cases where there are no insiders. We also argue that variations in these estimates are unlikely to be related to variations in the amount of inside information but rather are more likely due to other factors such as variations in bookmakers' costs or the extent of competition in betting markets. |
| JEL: | G14 L83 Z20 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19740 |