A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
- Topic classification is ongoing.
- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 36 resources
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An important group of traders in the foreign exchange market is governments who often adhere to a foreign exchange rate policy of occasional interventions with otherwise floating rates. In this article we provide a theoretical model and empirical evidence that government foreign exchange interventions create significant adverse selection problems for dealers. In particular, our model shows that the adverse selection component of the foreign exchange spread is positively related to the variance of unexpected intervention and that expected intervention has no impact on the spread. After controlling for inventory and order processing costs, we find that bid-ask spreads increase with U.S. dollar and German deutsche mark foreign exchange rate intervention during the period 1976-94. Furthermore, when the intervention is decomposed into expected and unexpected components, we find a statistically and economically significant increase in spreads with the variance of unexpected intervention, while expected intervention has no significant impact on spreads.
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We analyze a distressed firm indebted to many creditors. The firm's owners have the option of choosing the sequence of restructuring negotiations with the creditors. We show that sequencing flexibility is beneficial to firm owners, and that the optimal sequencing of restructuring negotiations involves exploiting the firm's liabilities to some creditors so as to moderate the demands of others. Moderately distressed firms will extract concessions from all creditors. In this case, owners can gain if they can credibly commit to conditional restructuring agreements that link the concessions of one creditor to concessions by others.
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The Nasdaq market came under intense pressure from regulators and class-action lawsuits following allegations of tacit collusion by Christie and Schultz (1994). This article examines the changes in transaction costs on the Nasdaq from January 1993 through June 1996 using 16 million trades in 30 stocks. Effective spreads cannot be matched. However, the autocovariance spread estimator of Roll (1984) works well with intraday data over this period. This spread estimator reveals that trading costs declined significantly for 29 of the 30 stocks over 1993-96.
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There is a global trend in initial public offerings toward the increased use of book building. Relative to other methods such as auctions, a key feature of book building is that the underwriter has total discretion in allocating shares, allowing allocations to be based on long-term relationships between underwriters and investors. In a multiperiod model with endogenous (and costly) information acquisition. I show that the underwriter's ability to lower underpricing depends largely on its ability to favor regular uninformed investors. One implication is that the hybrid book building/open offer method, which is becoming increasingly popular internationally, will lead to higher underpricing than straight book building.
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This article develops an efficient and accurate method for numerical evaluation of the integral equation which defines the American put option value function. Numerical integration using Gaussian quadrature and function approximation using Chebyshev polynomials are combined to evaluate recursive expectations and produce an approximation of the option value function in two dimensions, across stock prices and over time to maturity. A set of such solutions results in a multidimensional approximation that is extremely accurate and very quick to compute. The method is an effective alternative to finite difference methods, the binomial model, and various analytic approximations.
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Empirical evidence that expected stock returns are weakly related to volatility at the market level appears to contradict the intuition that risk and return are positively related. We investigate this issue in a general equilibrium exchange economy characterized by a regime-switching consumption process with time-varying transition probabilities between regimes. When estimated using consumption data, the model generates a complex, non-linear and time-varying relation between expected returns and volatility, duplicating the salient features of the risk/return trade-off in the data. The results emphasize the importance of time-varying investment opportunities and highlight the perils of relying on intuition from static models.