Questions tagged [financial-markets]
The financial-markets tag has no usage guidance.
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Order-driven vs quote-driven markets
What is the difference between order driven and quote driven markets? Is there any theoretical microstructure book that gives the intuition behind the types of markets with respect to the orders that ...
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2answers
70 views
Is the fundamental analysis also a self-fulfilling prophecy?
John J. Murphy in the first chapter of his book "TECHNICAL ANALYSIS OF FINANCIAL MARKETS" says that concerns regarding fundamental analysis being a self-fulfilling prophecy are seldomly ...
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62 views
Why are shares exempt from GST?
Why is the financial trading sector exempted from consumption taxes?
For example, shares seem to be exempt from GST in both Australia and Canada. What is the intention behind this? Is it common for ...
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79 views
Why do stocks that don’t pay any dividends change price when the company does better?
I don’t understand why (non-dividend paying) stocks increase in price when a company is successful; is it just because everyone expects that everyone else will find it more valuable because the ...
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1answer
31 views
Does the Fed/SEC have tools to address shock-propagation from correlation of fund flows?
Premise
In 2017, passively invested assets totaled 37% of mutual funds and ETFs; by 2021 this number is closer to 50% if not more. After the market downturn in (March) 2020, the Fed updated their ...
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98 views
Why is South Korea classified as an Emerging Market economy?
I have recently found out that South Korea is part of the MSCI Emerging Markets Index, and that the South Korean Won (KRW) currency trades as a non-deliverable currency. Furthermore, the South Korean ...
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14 views
What is the intuition for the potential loss of market makers on LS-LSMR?
What risk do liquidity providers take on when they provide liquidity to an LS-LSMR automated market maker pool?
How much can they lose?
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17 views
Why Hanson's logarithmic scoring rule define an Automated Market Maker?
Why Hanson's logarithmic scoring rule define an Automated Market Maker?
We have in this paper
in page 47, section automated market maker, that this scoring rule can "easily" be turned into ...
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1answer
25 views
why federal fund rate vs treasury bond yield generally move in the same direction?
My own thought is, if the fed lowred federal fund rate, peoole should look for investment with greater return, like treasury bond. More demand=decline in yields but why do they generally move in the ...
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112 views
What is the correct way of calculating the “average” price based on the “Open,High,Low,Close” daily trade fields?
Open,High,Low,Close
I have these fields, representing the "opening" amount, the highest for the day, the lowest for the day, and what it closed at.
I'm trying to determine the "average&...
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65 views
Where does investment originate from in the circular flow model?
The above image is from my macroeconomics textbook.
I’m struggling to understand the “financial markets” corner. If financial markets refers to banking and perhaps the stock market, is it true that ...
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1answer
46 views
Literature on DSGE models featuring a financial sector
I recently read a ECB primer on DSGE models featuring the financial sector and became interested in the field. I also started to read some of the earlier literature in that field (e.g. Gertler & ...
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51 views
CAPM and beta for individual stocks
Why do we just assume that the β is symmetric for a stock? Could it not very well be the case that the β has a larger leverage (covariance with the market) for example 1.2 in a bear (baisse) market ...
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1answer
63 views
Volatility and the stock market
In general, it is known that market volatility increases during bear markets while it decreases during bull markets. Why is this the case? It seems strange that volatility is linked to the the general ...
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1answer
23 views
Theory behind financial flows not going to the most developing nations even though they have the highest growth rates
I remember reading a bunch of articles on this a few years ago, but I can't find any of the references any more.
It has been a while since I looked at this, so here is a rough paraphrase of the ...
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70 views
What does the Fed mean by “smoothening money market functioning”?
In many recent interviews, Fed Chairman Jerome Powell has repeatedly mentioned that ensuring the smooth functioning of money markets is a key goal of the Fed's recent monetary policy actions. I want ...
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34 views
Does the federal reserve create any type of deadweight/welfare loss?
In microeconomics, we learn that when a good is overproduced or under produced, there is a dead weight loss associated with it. It seems like the same concept would apply to macroeconomics, where the ...
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1answer
66 views
How does the GDP multiplier work?
When we learn about the GDP multiplier, it is portrayed as 1/MPS, because savings are supposedly a leak out of consumer spending. However, what I don't understand is aren't those savings spent anyways ...
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44 views
Why Does Deficit Spending Work Without a Liquidity Trap?
My understanding is that in a functioning economy, the financial market clears when the nominal interest rate is above zero. It is only when it reaches zero that a liquidity trap occurs and the ...
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1answer
39 views
What value do virtual traders of commodity add to the market?
Many if not most companies trading in commodities are only trading them on paper. They will not use the commodity they are buying and can not take deliver of the physically commodity.
What value do ...
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1answer
26 views
CDO and Nonpositive Equity Questions
I have two questions about statements made in this video: https://www.khanacademy.org/economics-finance-domain/core-finance/money-and-banking/bank-bailout/v/bailout-2-book-value
At 6:25, the video ...
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2answers
57 views
If a CDS is x%, why does this mean $(1 - x)\%$ probability of default?
At 11:52, Tim Bennett says:
Well let's have a look at
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some prices. Currently the cost of
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insuring Greek debt is in excess of
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$\color{green}{2,000}$ basis points. ...
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39 views
How to Calculate Bond Yields
According to Bloomberg, the coupon rate on a 10-year UK government gilt is 4.75%. Bloomberg also states that the yield is currently 0.47%, and the market price £144.57.
The UK Debt Management Office (...
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1answer
68 views
Understanding Bond Yields
According to Bloomberg, the coupon rate on a 10-year UK government bond is 4.75%.
Bloomberg also states that the yield is currently 0.55%, and the market price £143.51.
But if the following formula ...
2
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0answers
37 views
Convex transaction costs
Why do we assume convex transaction costs in theoretic models? What is the intuition and the strict definition of this assumption?
Well, I have in mind the Glosten model in 1994. Neither he provides ...
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1answer
37 views
Why'd the lender suffer the collateral haircut, not the borrower?
In the quote below, why'd Steve offer $10.5, when your Air Jordans are worth \$11? Why wouldn't Steve (the lender) assign the collateral haircut to you, and require you to pay him \$11 + risk premium? ...
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1answer
65 views
Beginner wanting to learn about economics/finance to explore career options?
I want to explore the banking/financial industries more for potential career options, can you recommend any books/ free online courses and sources in general as a starting point to build on my ...
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1answer
38 views
What's the special notation?
I'm studying "ALGORITHMIC AND HIGH-FREQUENCY TRADING". Page 249 of it tries to find a formula for $h(t,q)$. First, it supposes $h(t,q) = \bar\kappa log \space\omega(q,t)$ then let $\omega(t)=[\omega(...
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1answer
494 views
Competitive vs complete and non-competitive vs incomplete marekts
The very insightful questions that arise, when someone studies micro foundation are the following: What is the difference between competitive and complete marekts? When we refer to the first is it ...
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1answer
36 views
What are good books about financial markets?
I found answers on this question online but people always recommend books for beginner investors who want to become rich. I just want book that is about history and role of financial markets and book ...
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27 views
demand for money
I am currently studying the demand for money by Blanchard. this model assumes that the amount of money held is basically related to transaction levels and the the attractiveness of bonds.
i.e.: ...
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1answer
26 views
What are financial service “passports”?
What are “passports” in the context of financial services?
I have also heard the term “passporting rights.”
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1answer
50 views
Can futures buying/selling distort price discovery?
How credible is the suggestion that specific parties distort price discovery (rig the market) of a given asset by buying/selling corresponding futures contracts or any other derivatives.
Should these ...
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1answer
39 views
What data/factors/attributes do the professionals monitor in a top-down analysis on the macroeconomics?
I am learning to do top-down analysis on a number of sectors in the US equity markets. I have never done it before and I would appreciate it if some professionals can share their experiences with me.
...
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33 views
Showing that a market model has arbitrage and describing martingales
This is an exercise which I came upon while studying an introduction to financial mathematics.
Exercise :
Consider the finite sample space $\Omega = \{\omega_1,\omega_2,\omega_3\}$ and let $\...
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1answer
75 views
What are the arguments for banning insider trading?
I can't see any economic argument for banning insider trading. In general, the point of allowing financial securities to be traded is to ensure that they are properly valued. "Insiders" seem better ...
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3answers
159 views
Why is a Normal Yield Curve a sign of a healthy economy?
I think the question is pretty self explanatory. I'm just trying to understand the logic behind why an upward sloping yield curve indicates a good economy?
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1answer
154 views
Why do ONLY Indian staffing/“consulting” bodyshops flood the US job market?
Why do ONLY Indian staffing/"consulting" bodyshop agencies flood the US job market, and why do they flood ONLY the US?
This is definitely not just "Well, many Indians have at least somewhat ...
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1answer
58 views
Are stock exchanges market makers?
Are stock exchanges like NASDAQ and NYSE market makers? In other words, are they providing liquidity by pairing individual buyers and sellers with each other in real-time? Or does it work differently?
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634 views
How does IS-LM model reduced investor confidence?
I am doing an essay on how a sovereign debt rating downgrade to junk status affects the economy. I wanted to use a theoretical framework to think about it, and seeing as an increase in the interest ...
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3answers
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How to calculate average buy price when you buy, sell and rebuy
I wanted to get my avaerage buy price for some stocks I bought and see if I made money.
So far for just buying and then later selling I have been calculating the avaege buy price using this formula
<...
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1answer
76 views
World Stock Markets that went up in 2008
We all know that the US stock market(s) collapsed in price in 2008, see https://en.wikipedia.org/wiki/United_States_bear_market_of_2007%E2%80%9309.
I was wondering what countries' stock markets went ...
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418 views
Are cryptocurrencies a ponzi scheme or a bubble?
Several users in this forum have addressed bitcoin and other cryptocurrencies as ponzi schemes. Bitcoins have several uses which could legitimate its value as a currency, but also have received ...
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1answer
18 views
Gold charts on different currencies
I have this two charts of gold prices for the last 60 days. One is in Dollars and the other in Euros. Why they are not an exact match?
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Graph of liquidation of trade versus price of commodity
Suppose I want to open a long position (that which increases in value as the commodity goes up in value) in some commodity whose price at the time of opening the trade is, say, $p$. The position is ...
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1answer
31 views
Financial markets predictions [closed]
How do economists/investors predict supply and demand in financial markets such as indices, currencies, etc?
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1answer
22 views
Why are most of open market orders so far from the mid price?
Say there is an exchange with open buy and sell orders, why are there so many orders placed. So far away from the mid price. So for example is lowest sell order is say 1.01 and highest buy order is 1....
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1answer
944 views
Why obligation acceleration triggers Credit-Default Swaps (CDS)?
ISDA Credit Event definitions state that CDS can be triggered in an event of Obligation Acceleration. What does that mean? If for example, a country pays a bond 1 year prior to maturity are CDS ...
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248 views
Monthly average rate of discount, 3 month Treasury bills, Sterling Vs 1 Month
I have been advised by one of my professors to use UK treasury bills for a risk free rate when calculating expected returns for stocks.
I wanted to know whether I should be using 1 month T-Bills or 3 ...
