Posts Tagged ‘debt consolidation’
Tuesday, March 16th, 2010
We discussed methods for estimating the information content of trades and the effect of inventory control on prices. The models that we discussed generally assume that only one of the effects (information or inventory control) is present. However, the empirical predictions of the asymmetric information and inventory control market microstructure models are very similar. Both theories predict that prices will move in the direction of the trade: a buyer-initiated order increases bid and ask prices, whereas a seller-initiated trade decreases bid and ask prices. This makes it difficult to distinguish the two theories empirically, unless good data on inventories are available. However, this is rarely the case.
Fortunately, in the absence of inventory data there is another way to separate information effects from inventory effects. Theoretically, information effects arise because trades reflect new information. This information will be incorporated in the price. If the market is efficient, the impact will be immediate and permanent. In contrast, inventory effects arise due to liquidity providers’ inventory imbalances. If the liquidity providers actively manage their inventory, these imbalances will be temporary. As a direct consequence, the price effect of trades will also be temporary and will reverse in the future. This gives a handle to distinguish information from inventory control effects:
information has permanent price effects whereas inventory effects are transitory.
Tags: business objectives, cash reserves, debt consolidation, investment opportunities, loans guide, money guide, refinancing
Posted in business strategy, campaigns, cash demand, companies, credit cards | Comments Off
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