Questions tagged [financial-markets]

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Fuel prices spot vs forward

The commodities market is , for the most part, a forward one. How come then prices of gasoline in gaz stations jump almost overnight whenever a geopolitical tension arises?
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Why do users post information and their opinions on micro-blogging platforms?

I am working on a research paper in which I will investigate the impact of social media and micro-blogging platforms on the financial market. With regard to the theoretical foundations, I would like ...
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What is the Likelihood and Impact of US Treasury Bonds being Callable again?

Since 1985 US Treasury bonds have been issued as non-callable. I suspect this had significant impact on investors who wish buy treasuries and also impacted their hedging properties. First, what ...
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Are retirement funds part of the capital market?

I was reading an article, which mentioned the withdrawal of high sums (billions) from retirement funds to ease the crisis caused by the covid-19. It also said that the capital market will become ...
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What underpins the argument that commercial paper is systemically important?

The Financial Stability Report recently had a paper on money market instruments and in one of the sections was a line that read: CP rates enter as inputs into credit-sensitive benchmark rates, and ...
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How do I evaluate unlisted distribution companies and get their KPIs?

I am going to do a competitive analysis for 5 distribution companies, however, I could not find out their financial report as they are unlisted. If I need to figure out what they are best at for me to ...
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Was the financial crash of 2008 caused by top graduates of the American Ivy Leagues working at wall street banks?

From this article by Lisandro 'Leloy' Claudio, a Philippine/a Filipino professor of history, politics, South & Southeast Asian Studies (and not necessarily of finance, economics, mathematics or ...
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Understanding Mortgaged Backed Security during financial crisis

This is my understanding of the mortgage backed security.Banks will give loans to customers, and then they decide to sell the loans to investment banks and charge a fee with it to earn profit. Now the ...
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Explain the statement: "Due to international capital mobility, S and I should not move together."

I read this statement in ADB's e-course on financial globalisation. I have basic knowledge of the economics, but nothing too advanced. So, what I understood is that since in there is much greater ...
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Are short squeezes becoming more common, and if so, why?

This year I have read about short squeezes more often than any time in the past. Are short squeezes becoming more common, and if so, why?
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Are there any notable exceptions to the Impossible Trinity theory?

I am referring to the theory presented on Wikipedia and The Economist that states: The impossible trinity (also known as the trilemma) is a concept in international economics which states that it is ...
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Evidence for or against the Efficient Market Hypothesis in financial markets and the currently dominant view

The Efficient Market Hypothesis seems to draw quite a lot of attention in popular debates, and in general during discussions on Behavioral Finance, where it is often seen as not entirely correct. I ...
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Quote or price driven markets

Where can I find some details about quote driven markets? Can anybody show any notes or provide some paradigm about what the trader sees when he is about to trade in such a market? They say that he/...
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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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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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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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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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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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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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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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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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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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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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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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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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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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1 answer
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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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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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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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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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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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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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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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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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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 11:52 some prices. Currently the cost of 11:57 insuring Greek debt is in excess of 12:02 $\color{green}{2,000}$ basis points. ...
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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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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 ...
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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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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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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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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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2 votes
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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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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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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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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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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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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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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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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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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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