1 / 6

Information Shocks, Liquidity Shocks, Jumps, and Price Discovery – Evidence from the U.S. Treasury Market

Information Shocks, Liquidity Shocks, Jumps, and Price Discovery – Evidence from the U.S. Treasury Market Discussion by Clifton Green (Emory University) Better understand jumps in Treasury markets Look at influence of liquidity on jumps Jumps

paul2
Download Presentation

Information Shocks, Liquidity Shocks, Jumps, and Price Discovery – Evidence from the U.S. Treasury Market

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Information Shocks, Liquidity Shocks, Jumps, and Price Discovery – Evidence from the U.S. Treasury Market Discussion by Clifton Green (Emory University) • Better understand jumps in Treasury markets • Look at influence of liquidity on jumps

  2. Jumps • Security returns are better explained with continuous processes that include jumps • Relevant for pricing and risk management • What horizon is relevant? • Replicating portfolio • What do practitioners say?

  3. Source of Jumps • “ A large price change occurs either when • A market order hits the existing limit orders following the announcement • New limit orders come in and set a new price moving the existing mid-quote up/down. “ • Is the data able to distinguish between these two causes of jumps? • Not just quotes but full limit order book • Public information vs. private information • For public information, active vs. passive changing of quotes

  4. News vs. No-News Jumps • Source of jump may be different between news and no-news jumps • Are no-news jumps informed trading or unanticipated news? • Do no-news jumps happen concurrently across bonds? • Perhaps extend the sample back to 2003 to get more observations • 10% of jumps are no-news

  5. Liquidity and Jumps • “Liquidity shocks in general precede jumps in bond prices and play an important role in bond price jumps” • Could selection bias play a role? • Reduction in liquidity could be random • For no-news jumps, examine depth at bid or ask (jump specific) • Liquidity vs. informed trading • Look for reversals over longer periods

  6. News vs. No News

More Related