2003 Series

Intra-day Patterns in the Returns, Bid-ask Spreads, and Trading Volume of Stocks Traded on the New York Stock Exchange

Reference: 2003-14
Authors: Chris Brooks, J. Hinich, Douglas M. Patterson

Abstract: Much research has demonstrated the existence of patterns in high-frequency equity returns, return volatility, bid-ask spreads and trading volume. In this paper, we employ a new test for detecting periodicities based on a signal coherence function. The technique is applied to the returns, bid-ask spreads, and trading volume of thirty stocks traded on the NYSE. We are able toContinue reading


Application-Based Financial Risk Aggregation Methods

Reference: 2003-11
Authors: Jacques Pézier

Abstract: Financial risks are usually analysed by type and by activity using different assumptions and methodologies as may seem appropriate in each case. This approach makes it very difficult to ascertain the degree of diversification between various activities and to obtain a proper estimate of global risk. We show that different risk aggregation methodologies should be used depending on theContinue reading


Long-term Information, Short-lived Securities

Reference: 2003-10
Authors: Dan Bernhardt, Ryan Davies, John Spicer

Abstract: We explore strategic trade in short-lived securities by agents who possess long-term information. Trading short-lived securities is profitable only if enough of the private information becomes public prior to contract expiration; otherwise the security will worthlessly expire. We highlight how this results in trading behavior fundamentally different from that observed in standard models of informed trading in equity. Specifically,Continue reading


Multivariate GARCH Models: Software Choice and Estimation Issues

Reference: 2003-07
Authors: Chris Brooks, Simon Burke, Gita Persand

Abstract: A large number of important practical tasks can be accomplished using a multivariate GARCH model. This paper examines the relatively small number of software packages that are currently available for estimating such models, in spite of their widespread use. The review focuses upon estimation issues and differences in available options for controlling the optimisation, and the review then considersContinue reading


What Drives Swap Spreads, Credit or Liquidity

Reference: 2003-05
Authors: Ying Huang, Salih Neftci, Ira Jersey

Abstract: This paper investigates the determinants of swap spreads. Compared with previous work done in this area, such as the seminal paper by Duffie and Singleton (1997), the paper includes daily credit spreads data in the time series framework. The issue is whether ‘liquidity’ or ‘credit’ (or both) is the main determinant of swap spreads dynamics. Our results agree withContinue reading


An Empirical Study of Credit Default Swaps

Reference: 2003-04
Authors: Frank Skinner, Antonio Diaz

Abstract: We examine the pricing of Asian and non-Asian credit default swaps that traded during the 1997 to 1999 time period. We employ two credit risk models, Duffie and Singleton (1999) and Jarrow and Turnbull (1995). We argue that credit default swaps should have a positive economic value since credit spreads reflect differences in liquidity as well as credit risk.Continue reading


The At Issue Maturity Of Corporate Bonds: The Influence Of Credit Rating, Security Level, Duration And Macroeconomic Conditions

Reference: 2003-01
Authors: Geetanjali Bali, Frank Skinner

Abstract: We examine the determinants of the at issue time to maturity of corporate bonds. We find evidence that corporations partly determine the at issue maturity of bonds by responding to economic conditions. They also appear to immunize by matching the maturity of assets with the at issue maturity of bonds regardless of credit quality. Finally, we find evidence thatContinue reading