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11 votes
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Are stock exchanges market makers?

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 ...
Ubiquitous's user avatar
8 votes
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Are cryptocurrencies a ponzi scheme or a bubble?

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 ...
Ege Erdil's user avatar
  • 691
5 votes

Why is gold a safe haven investment?

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 ...
Tobias's user avatar
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5 votes
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Why does falling global bond yields signal coming deflation?

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: ...
FreeMarketUnicorn's user avatar
5 votes

Why is the Chilean economy so much better than the rest of the countries in South America?

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 ...
Kontorus's user avatar
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5 votes
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Competitive vs complete and non-competitive vs incomplete marekts

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 ...
1muflon1's user avatar
  • 57k
5 votes
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How does the GDP multiplier work?

The multiplier comes from the solution to the goods market equilibrium. In economics everything is endogenous. Increase in income increases consumption that increases demand, demand increases ...
1muflon1's user avatar
  • 57k
5 votes
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Can a single dummy variable be made to meet multiple criteria?

"Dummy variables" are binary variables, i.e. indicator functions. The indicator function takes the value $1$ if the associated event happens: $$I\{A\}= \begin{cases} 1 & A\; {\rm happens}...
Alecos Papadopoulos's user avatar
4 votes
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Free Data Source for Credit Spreads?

Yes, there's daily data available on the St. Louis Fed's FRED.
dismalscience's user avatar
4 votes
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Difference between double auction and continuous double auction?

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 ...
Dave Harris's user avatar
  • 2,006
4 votes
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Volatility and the stock market

There seems to me no relationship between the general direction of price movements and market volatility. Clearly the market disagrees with you. As the saying goes, "markets go up in an escalator ...
Michael's user avatar
  • 2,619
3 votes

Difference between Unit and Share?

A share or stock is part of an individual company. Unit (Trusts) are a collection of different (and usually related) shares. For example, I am currently investing in a Singapore Equity Fund. And this ...
PhDing's user avatar
  • 764
3 votes

Free source of large amounts of financial data

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....
emeryville's user avatar
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3 votes

Financial Smart Contract on Ethereum: can an Ether Futures contract be priced in Ether?

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 ...
serakfalcon's user avatar
3 votes
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Connection between negative interest rates and negative bond yields

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 ...
FreeMarketUnicorn's user avatar
3 votes

Financial Economics Textbooks

ASSET PRICING THEORY: Cochrane, Asset Pricing is a good book in that it displays the way that hard-core asset pricers see the world. Huang and Litzenberger, Foundations for Financial Economics is ...
Fix.B.'s user avatar
  • 2,668
3 votes

Why is gold a safe haven investment?

Gold is safe-haven investment for mainly two reasons: It is a scarce resource. This alone would not explain why other scarce resources aren't good stores of values. The second reason is: It has the ...
Rexcirus's user avatar
  • 131
3 votes
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What is the difference between USD/EUR and EUR/USD when talking about Forex

When the forex market does a quote, it is done in currency pairs. When you sell a currency, you have to be buying something in return. That is why they are quoted in pairs. For example when you buy ...
MH.Q's user avatar
  • 123
3 votes

Beginner wanting to learn about economics/finance to explore career options?

A great starting point is "Fundamentals of Corporate Finance", Ross, Westerfield & Jordan. This book will give you a good overview of key concepts in finance. This book is widely used in ...
Regio's user avatar
  • 4,188
3 votes
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What does the Fed mean by "smoothening money market functioning"?

Money markets are where financial institutions and corporates access short-term funding. One money market where the Fed has intervened directly is the overnight repo market where overnight loans ("...
Michael's user avatar
  • 2,619
3 votes
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Literature on DSGE models featuring a financial sector

This is actually one of the more exciting development in DSGE modelling since financial crisis. Including financial sector or friction is definitely a growing area of research and interest. ...
1muflon1's user avatar
  • 57k
3 votes
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Where does investment originate from in the circular flow model?

Investment ultimately comes from households through savings. From a macroeconomic perspective savings is equal to to investment ($S=I$). Investment comes from income because saving is portion of ...
1muflon1's user avatar
  • 57k
3 votes

What is the correct way of calculating the "average" price based on the "Open,High,Low,Close" daily trade fields?

You cannot obtain that information with the data provided. You would need periodic samples throughout the day.
RegressForward's user avatar
3 votes

Is the fundamental analysis also a self-fulfilling prophecy?

If a sufficient fraction of market participants follow technical analysis it can work as self-fulfilling prophecy. If some pattern occurs that technical analysis interprets as signalling an imminent ...
Grada Gukovic's user avatar
3 votes
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Are there any notable exceptions to the Impossible Trinity theory?

First of all that is not a theory but result/implication from Mundell–Fleming model (which is the theory that gives rise to the result). Second the description you are using is lacking one caveat that ...
1muflon1's user avatar
  • 57k
3 votes
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How are stock prices determined in the following cases?

As in the answer here (which you referred to yourself), the price of a stock is the price the stock was last traded at (until that price is updated because a new trade happens). A trade occurs if a ...
BrsG's user avatar
  • 1,652
3 votes
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How to prove the value of a European Call Option is convex on the underlying’s price?

I know nothing about finance so please do not be too harsh. Let's sell 1 call option with underlying price $\alpha S_a + (1-\alpha) S_b$ and strike price $K$. This means that I need to pay $$ \max\{\...
tdm's user avatar
  • 12.4k
3 votes

How to prove the value of a European Call Option is convex on the underlying’s price?

Proposition. If $f:A\rightarrow\mathbb{R}$ and $g:A\rightarrow\mathbb{R}$ are convex functions defined on convex subset $A$ of $\mathbb{R}^n$, then $\max(f,g):A\rightarrow\mathbb{R}$, defined as $\max(...
Amit's user avatar
  • 8,986
2 votes
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Gold and loss of faith in central banking

I think @DornerA gave a good answer for reasoning behind the mechanism. For a historical example, look no further than the fiscal crisis and the rapid increase in gold price from 2008-2011. Of ...
John L.'s user avatar
  • 1,228

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