Posts Tagged ‘currency trading’
The simple empirical credit models
Sunday, February 14th, 2010
In the foregoing articles we have seen that in the short run, the prices of financial instruments may deviate from their fundamental value on account of microstructure frictions such as bid–ask bounce, inventory control and order imbalances. Previous article introduced empirical models for estimating transaction costs and the price impact of a trade. These models were quite simple: they assumed that the price impact of a trade was immediate. In reality, this is not always so, and there may be lagged effects or slow adjustments. We therefore need a richer dynamic structure in order to model prices and trades on financial markets. In this chapter, we introduce dynamic timeseries models for prices and trades, and show how they can be used to describe the market’s convergence on the new equilibrium price after a shock.
This article extends the simple empirical models of Chapter 6 to a full dynamic setting. We show how time-series models for prices and trades can be used to study these questions. Throughout the chapter, we focus more on the structure and interpretation of the models than on the econometric and sampling issues that often arise in estimating dynamic time series using microstructure data. Section 9.1 introduces a dynamic model for prices and order flow, with lagged effects of order flow on prices and order-flow dynamics. Section 9.2 generalizes that model to the vector autoregressive model, which was introduced into microstructure by Hasbrouck (1988, 1991, 1993, 1995) and has since become the standard reference model in the literature. We then turn to a formal decomposition of prices into permanent and transitory components, where the permanent component is interpreted as the equilibrium value of the
asset, or the efficient price. Section 9.3 examines price discovery, i.e. the process of convergence on the efficient price, and the role of order flow in this process. Section 9.4 studies price discovery for securities that are traded in multiple market-places. The appendix gives some tools for dealing with dynamic econometric models and lag polynomials.
Tags: bad debt, car loans, compare credit, currency trading, debt settlement, forex, funds, home equity, portfolio
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Whenever the credit risk premium falls
Friday, October 30th, 2009
Whenever the equity risk premium falls below current spread levels, there is a quasi-arbitrage opportunity between corporate bonds and equities. After a long period with a positive equity credit premium, the picture changed in 1999, signaling the height of the equity bubble. The interpretation of this was that expected returns on corporate bonds versus equities were extremely attractive. While corporate bonds actually outperformed equities by far between 2000 and 2002, those years were characterized by a massive widening of credit spreads. Due to the bursting of the tech bubble and the credit spread tightening since fall 2002, the gap has closed.
Tags: bad debt, business objectives, car loans, compare credit, currency trading, debt consolidation, debt settlement, forex, funds, home equity, investment opportunities, loans guide, portfolio, refinancing
Posted in budget analysis, business goals, finances, financial principles, financial risks, loans, management, merchandise | Comments Off
Business Activity Tax
Saturday, April 18th, 2009
The simplest business activity tax asks a business to report its value added by activities in a state and pay a small percentage of that (e.g., 0.25%) as state tax. A different approach asks for this payment only if it is larger than what is owed under the corporate income tax. This approach doesn’t change the tax liability of most profitable corporations but provides a minimum tax for corporations experiencing losses and non-corporate business forms such as partnerships.
New Hampshire has such a tax. Nevada has seriously considered one and may have enacted it. The concept had considerable support in Texas in 1997 and probably would have been enacted except for a problem that exists in Texas but doesn’t exist in Tennessee. The Texas Constitution bars any tax based on income, so the Tennessee tax on dividends and interest would be unconstitutional in Texas. As applied to a company selling professional services, the value-added tax base is almost identical to what an income tax base would be. For sure, any Texas business activity tax would have been tied up in court and might have been declared contrary to the state’s constitution.
For more detail on business activity taxes and proposals that some form of this tax be adopted in Tennessee, see the Tennessee Department of Revenue paper, Business Taxes: Current Structure And Options For Change.
Tags: credit score, currency trading, financial crisis, getting out of debt, investments, payday loans, realtors
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Patronage Websites
Friday, September 26th, 2008
The following websites are under our patronage:
- Business Prospects Blog – Find effective ways to invest your money
- Finances Insight Blog – A thorough analysis of financial affairs
- Effective Investments Blog – Efficient money investing strategies
- Money Innovation Blog – Modern solutions for money management
- http://loans.innovative-finances.com/ – Effective loans and mortgage advice
- http://realestate.innovative-finances.com/ – Modern solutions for real estate trading
Tags: banking, credit score, currency trading, fiscal problems, getting out of debt, payday loans, realtors
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