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No, they are not market makers. A market maker is someone who (i) quotes two prices (one 'low' and one 'high'), (ii) will buy from any seller at the low quoted price (even if there is no corresponding buyer right now), (iii) will sell to any buyer at the high quoted price (even if there is no corresponding seller) right now. This injects liquidity into the ...


7

In general, "Ponzi schemes" in the context of asset pricing refer to "rational bubbles", or a failure of the transversality condition you need when passing from a flow identity to a present value identity. They are not "fraudulent schemes". For instance, there can be a rational bubble on a "fundamentally" worthless asset in a perfect foresight world if its ...


6

At university classes, I always learned that the only economist who ever became rich was Ricardo. However, Ricardo was already rich before becoming an economist. This article seems support this claim. It also gives an explanation for the lack of rich economist: If becoming wealthy is your goal in studying economics, you may be disappointed. Although ...


6

1) Would lead to the return of general panic led bank runs, and introduce additional instability to the system. It´s not generally appreciated, that 19th century bank runs were not just a symptom of insolvency or illiquidity, but were also occasionally triggered by competitors (other banks) spreading rumours. Generally this is a bad idea that rests on the ...


6

Weighted Average Maturity of Marketable Debt


6

The seminal paper in this area with over 3,000 citations is by Shleifer and Vishney: Textbook arbitrage in financial markets requires no capital and entails no risk. In reality, almost all arbitrage requires capital, and is typically risky. Moreover, professional arbitrage is conducted by a relatively small number of highly specialized investors ...


5

You could see it as a coordination game and an example of a rational bubble. Because everybody knows that people start buying gold and the price goes up when the economy tanks, it is actually a good strategy to do just that. Similar things happen for example with the Swiss Franc. The idea that the stock of gold is fixed and hence it's price is stable is ...


5

What are volatility swaps? Before the introduction of what is now volatility swaps, investors gained exposure to the market's volatility (yes, they already wanted to) through call and put options, products that depend on volatility, but also heavily on the price level of the underlying asset. A volatility swap is a forward contract on future realized price ...


5

Here are a few reasons that build on @Dismalscience's answer. Capital requirements: Banks don't typically need to hold capital against loans they originated but subsequently moved into an SPV. This might be regulatory arbitrage but it might be a socially efficient outcome meant to move assets and liabilities out of the banking system. Market segmentation: ...


5

This is honestly a pretty complicated question - it's very difficult to pinpoint any exact factors that have led to Chile being so successful relative to its Latin American counterparts. I'm not particularly knowledgeable on the political factors, so I'll focus on some economic ones. As a developing country, Chile has several factors that have really ...


5

Bond yields falling from their current near-zero position will place them in negative yield territory. Negative bond yields are deflationary by definition. Paragraph 3, sentence 5 of the article says: With Bank Rate already close to the floor, and some UK bond yields now in negative territory... [emphasis added] To understand why negative bond yields ...


5

Complete market is a market where every possible asset or good can be assigned a price and where you have perfect information, can make perfect contracts and zero transaction costs. Any market can be complete regardless of its market structure. So you can have complete market dominated by monopoly, or oligopoly or monopolistic competition etc. Perfectly ...


4

One possibility would be to use Wolfram Alpha. If I type the search phrase market capitalization msft 3rd December 2010 then the search engine returns the following: If you use Wolfram Mathematica on your PC then you can import the data directly for processing using the FinancialData command (see here).


4

SPVs are typically used in MBS issuance to get the loans off the issuing bank's balance sheet, freeing up that balance sheet space to make more loans and providing bankruptcy-remoteness (i.e., the SPV would continue to function even if the issuer went bankrupt) to investors. This is why a securitizing bank would transfer loans to an SPV. However, given ...


4

I will post the obligatory Efficient Market Hypothesis answer. This does not directly answer the question, but addresses the aparent misconception that there is some secret economist knowledge that can be used to earn money in financial markets. Suppose there were some method that would help you to earn more money on financial markets. Suppose that the ...


4

The recommended books are decent. From these two I'd go with Bailey first and if you're comfortable with that, then LeRoy & Werner. The latter requires some background in linear algebra and optimization theory. If you want to study some econometric applications for financial economics, you might try: Cuthbertson & Nitzsche: Quantitative Financial ...


4

Yes, there's daily data available on the St. Louis Fed's FRED.


3

NA, in my opinion, is the lack of a trading strategy to generate excess returns, that means returns greater than those of assets in the same risk category. Note that it doesn't mean no risk. A market is efficient, again in my own understanding, when all the contents of an information set are reflected in the market's assets prices. There are 3 forms of ...


3

Myron Scholes and Robert C. Merton were 2 economists who co-founded Long-Term Capital Management fund. They made a lot of money initially both for themselves and investors by using trading strategies they had devised from their academic work. However, the success was quite shortly lived and 2 unlikely (according to their models) events - 1997 Asian financial ...


3

Fannie Mae and Freddie Mac bonds have long been viewed as having an implicit government guarantee, and though they received government support during the crisis, they never missed a payment to bondholders. This implicit guarantee was strengthened in July 2008 when Congress passed the Housing and Economic Recovery Act of 2008, which created a channel through ...


3

The high-cost area conforming loan limits within the contiguous United States were created by HERA (the Housing and Economic Recovery Act of 2008) and therefore do not exist prior to 2008. For periods prior to the enactment of HERA, just use the historical nationwide conforming limits. There was also a temporary bump to the conforming limits enacted a few ...


3

The total wealth (as is pointed out in the book) is given as : $$ X(1)=\delta_{0}B(1)+\delta_{1}S_{1}(1)+...\delta_{N}S_{N}(1) $$ The wealth at period one is just the sum of the securities (including amount invested in the bank) times their number. In other words, the total wealth is the amount of money this individual has invested in the different assets. ...


3

Short answer: the market has a forecast of the government numbers but the market considers the actual government numbers to contain information not available to the market. Therefore when unemployment is lower than the market forecasts this indicates that on average things will be better than than the market forecast before the release. This is not to say ...


3

There are countless models, from different perspectives (theory/econometric/etc.) on price impact of trade volume. The seminal model in market microstructure---the Kyle model (85 Econometrica) addresses this very issue. There are many descendents of this model. To demand a "formula" is a little simplistic. The usual framework for these models, if micro-...


3

In Keynes's Treatise on Money he argued that the phenomenon you describe, known as "normal backwardation", is due to the fact that certain commodities producers hedge their price risk (importantly, they hedge their risk much more than consumers) by selling futures. The intuition for why the producer does this is that it allows the producer to lock in the ...


3

Futures and Options are all about exchanging something for something else. These kind of derivatives all involve exchanging different 'kinds' of goods so it doesn't make sense to have both sides denominated in the same currency: When you have X Ethereum which you are willing to give up for Y Ethereum later, what you have is a loan. Loans aren't going to do ...


3

I cannot see the mechanism as to why if central banks set rates in positive territory when long term bonds yields are negative how this will cause the yield curve to invert. No need to seek a mechanism because the inverted yield curve occurs by definition in the scenario you describe. This Investopedia video defines inverted yield curve as follows: An ...


3

I assume that you are looking for macro financial data across countries. So, you can check out: World Bank Open Data with a specific query on Financial Sector IMF Financial Statistics or IMF Finances. Last time I used is a free registration was required . Agricultural Exchange Rate Data Set. This data set contains annual and monthly data for exchange rates (...


3

So, if a distinction is made, as continuous double auctions are usually just called double auctions, then the difference has to do with frequency. It is easier to have an example. The New York Stock Exchange is an example of a continuous double auction. Within its trading hours, you can bid in either direction as much or as often as you want and so can ...


2

What bdsl's comment means is this: Suppose there was a way for "experts" (here or anywhere else) to predict when the pound would start depreciating against the euro, and that this method predicted that it would begin to do so tomorrow. What would the experts do with this information? They would start selling pounds today in order to get out of the market at ...


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