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Articles 1 - 7 of 7
Full-Text Articles in Economic Theory
Tick Size Constraints, Two-Sided Markets, And Competition Between Stock Exchanges, Yong Chao, Chen Yao, Mao Ye
Tick Size Constraints, Two-Sided Markets, And Competition Between Stock Exchanges, Yong Chao, Chen Yao, Mao Ye
Yong Chao
We investigate competition between stock exchanges that choose the number of trading platforms to establish and the fee structure on each platform. U.S. exchanges compete for order flow by setting “make” fees for limit orders and “take” fees for market orders. When traders can quote continuous prices, the manner in which exchanges divide the total fee between makers and takers is irrelevant, because traders can choose prices that perfectly counteract any division of the fee. In such a case, order flow will simply consolidate to the platform with the lowest total fee. The one-cent minimum tick size constraints imposed by …
Collusive Bidding In The Fcc Spectrum Auctions, Peter Cramton, Jesse Schwartz
Collusive Bidding In The Fcc Spectrum Auctions, Peter Cramton, Jesse Schwartz
Jesse A. Schwartz
This paper describes the bid signaling that occurred in many of the FCC spectrum auctions. Bidders in these auctions bid on numerous spectrum licenses simultaneously, with bidding remaining open on all licenses until no bidder is willing to raise the bid on any license. Simultaneous open bidding allows bidders to send messages to their rivals, telling them on which licenses to bid and which to avoid. This “code bidding” occurs when one bidder tags the last few digits of its bid with the market number of a related license. We examine how extensively bidders signaled each other with retaliating bids …
Derivative Pricing Using Multivariate Affine Generalized Hyperbolic Distributions, José Fajardo, Aquiles Farias
Derivative Pricing Using Multivariate Affine Generalized Hyperbolic Distributions, José Fajardo, Aquiles Farias
José Fajardo
In this paper we use multivariate affine generalized hyperbolic (MAGH) distributions, introduced by Schmidt et al. (2006), to show how to price multidimensional derivatives when the underlying asset follows a MAGH distribution. We also illustrate the approach using market data from the BOVESPA (São Paulo Stock Exchange) and the exchange rate of the Brazilian Real vs. US Dollar to price some multidimensional derivatives.
Statistical Arbitrage With Default And Collateral, José Fajardo, Ana Lacerda
Statistical Arbitrage With Default And Collateral, José Fajardo, Ana Lacerda
José Fajardo
This paper studies the implications of the absence of statistical arbitrage opportunities in a two-period incomplete market economy where default is allowed but there are collateral requirements. Modified versions of the fundamental theorem of asset pricing are obtained.
Prediction Markets To Forecast Electricity Demand, Peter Cramton, Luciano De Castro
Prediction Markets To Forecast Electricity Demand, Peter Cramton, Luciano De Castro
Luciano I. de Castro
Forecasting electricity demand for future years is an essential step in resource planning. A common approach is for the system operator to predict future demand from the estimates of individual distribution companies. However, the predictions thus obtained may be of poor quality, since the reporting incentives are unclear. We propose a prediction market as a form of forecasting future demand for electricity. We describe how to implement a simple prediction market for continuous variables, using only contracts based on binary variables. We also discuss specific issues concerning the implementation of such a market.
Market Symmetry In Time Changed Brownian Models, José Fajardo, Ernesto Mordecki
Market Symmetry In Time Changed Brownian Models, José Fajardo, Ernesto Mordecki
José Fajardo
In this paper we examine which Brownian subordination with drift exhibits the symmetry property introduced by Fajardo and Mordecki [2006. Quantitative Finance 6, 219–227]. We find that when the subordination results in a Lévy process, a necessary and sufficient condition for the symmetry to hold is that the drift must be equal to-1/2. Also, we derive explicit conditions to test whether the NIG, CGMY and Meixner processes are symmetric or not. Finally, we perform some tests with real financial data.
Goodness-Of-Fit Test Focuses On Conditional Value At Risk: An Empirical Analysis Of Exchange Rates, José Fajardo, Aquiles Farias, José Renato Ornelas
Goodness-Of-Fit Test Focuses On Conditional Value At Risk: An Empirical Analysis Of Exchange Rates, José Fajardo, Aquiles Farias, José Renato Ornelas
José Fajardo
No abstract provided.