Trading Activity and Price Volatility in the Municipal Bond Market

Utilizing a comprehensive database of transactions in municipal bonds, we investigate the volume–volatility relation in the municipal bond market. We find a positive relation between the number of transactions and a bond's price volatility. In contrast to previous studies, we find a negative relation between average deal size and price volatility. These results are found to be robust throughout the sample. Our results are inconsistent with current theoretical models of the volume–volatility relation. These inconsistencies may arise because current models fail to account for the effects of overall market liquidity on the costs of large transactions.     

Information, Trading Demand, and Futures Price Volatility

We examine the relation between futures price volatility and trading demand by type of trader in the Standard & Poor's (S&P) 500-stock index futures market. We find that volatility covaries negatively with signed speculative demand shocks but is positively related to signed hedging demand shocks. No significant relation between volatility and demand shocks for small traders is found. Our results suggest that changes in positions of large hedgers destabilize the market, whereas changes in positions of large speculators stabilize volatility. Consistent with models with asymmetrically informed traders, we find that large speculators are likely to possess superior forecasting ability, large hedgers behave like positive feedback traders, and small traders are liquidity traders.     

Split Bond Ratings and Information Opacity Premiums

This paper examines the relationship between split bond ratings and bond yields at the notch level for newly issued corporate bonds. We find that split rated bonds average a 7-basis-point yield premium over nonsplit rated bonds of similar credit risk. The yield premium increases from 5 basis points for one-notch splits to 15 (20) basis points for two-notch (three-notch) splits. These findings indicate that investors demand higher yields for split rated bonds to compensate for the information opacity of such bonds. In addition, the yield premium for split rated bonds is higher during economic recessions, indicating investors are more risk averse during economic downturns. Consequently, split ratings impose higher borrowing costs for firms, especially during economic downturns.     

A Note on Computation of Implied Volatility

This is a note on computation of the implied volatility in theBlack–Scholes formula to evaluate an accuracy of the computation.     

Cash Flow Volatility, Prices and Price Volatility: An Experimental Study

The value of an asset is equal to the present value of its expected future cash flows. It is affected by the magnitude, timing and riskiness, or volatility, of the cash flows. We hypothesize that if the expected values of two assets?? cash flows are equal, the value of the asset with more volatile cash flows will be lower. Furthermore, we examine the impact of the volatility of cash flows on the volatility of prices. We consider a simple experimental environment where subjects trade in an asset which provides dividends from a known probability distribution. The expected value of the dividends is identical in all experimental treatments. The treatments vary with respect to the volatility of dividends. We find that when dividends are more volatile, transaction prices are lower. We also find that the volatility of prices is lower in the treatment with highly volatile dividends. In addition, as expected, trading volume is lower when cash flows are less volatile.     

Municipal Bond Liquidity and Default Risk

This paper examines the pricing of municipal bonds. I use three distinct, complementary approaches to decompose municipal bond spreads into default and liquidity components, and find that default risk accounts for 74% to 84% of the average spread after adjusting for tax‐exempt status. The first approach estimates the liquidity component using transaction data, the second measures the default component with credit default swap data, and the third is a quasi‐natural experiment that estimates changes in default risk around pre‐refunding events. The price of default risk is high given the rare incidence of municipal default and implies a high risk premium.     

货币政策与资产价格的波动

对于中央银行是否应该对资产价格的波动做出反应以及如何做出反应．在学术界仍然存在着激烈的争论。中央银行应否对资产价格的波动做出反应主要依据是看资产价格的波动能否对目标通货膨胀率造成影响，而非直接对任何的资产价格波动都做出反应。对资产价格做出反应形成的货币政策被称为“通货膨胀定标”的货币政策。我国应该根据具体国情进行货币政策的改革导向选择，并积极创造条件推行“通货膨胀定标”的货币政策。     

Price and Volatility Transmission across Borders

Over the past forty years, financial markets throughout the world have steadily become more open to foreign investors. With open markets, asset prices are determined globally. A vast literature on portfolio choice and asset pricing has evolved to study the importance of global factors as well as local factors as determinants of portfolio choice and of expected returns on risky assets. There is growing evidence that risk premia are increasingly determined globally. An important outcome of this force of globalization is increased comovement in asset prices across markets. This survey study examines the literature on the dynamics of comovements in asset prices and volatility across markets around the world. The literature began in the 1970s in conjunction with early theoretical developments on international asset pricing models, but it blossomed in the late 1980s and early 1990s with the availability of comprehensive international stock market databases and the development of econometric methodology to model these dynamics.     

Bias in an Empirical Approach to Determining Bond and Mortgage Risk Premiums

Empirical studies of bond and commercial mortgage performance often quantify a required risk premium by examining the difference between the promised yield and the realized yield as adjusted for default occurrence. These studies omit the effects of various other sources of risk, however, including collateral asset market risk, interest rate risk, and possibly call risk. These omissions downwardly bias the empirical risk premium estimate on the debt. In this paper, we disentangle and quantify the sources of this bias by modeling secured coupon debt (the commercial mortgage) as used in the calculation of a realized investment return. We consider deterministic and stochastic interest rate economies with mortgage contracts that are either noncallable or subject to a temporary prepayment lockout period. Given realistic parameter values associated with the term structure, underlying asset dynamics, and debt contracting, we show that the magnitude of the bias can be significant.     

货币供给、价格波动差异与经济增长:全球视角的经验研究

本文以OECD国家和金砖四国等为代表的发展中国家为考察对象,基于1980年第一季度至2010年第二季度的数据,通过结构向量自回归模型,重点就全球货币供给对不同价格水平波动差异,进而对全球经济增长稳定性的影响进行了经验分析。     

A Note on Forward Price and Forward Measure

The forward measure is convenient in calculating various contingent claim prices under stochastic interest rates. We demonstrate that caution needs to be drawn when the forward measure is used to price contingent claims that involve multiple cash flows. We also derive partial different equations for the forward price to demonstrate how forward contracts can be used for dynamic hedging and how hedges can be conducted if the payoff of a contingent claim depends on the forward price.     

中国信贷支持与房地产价格波动——基于SVAR模型的实证研究

本文利用1995-2010年的季度数据,通过建立结构向量自回归模型(SVAR)对中国的信贷支持(货币供给,信贷,利率)与房地产价格的动态关系和相互影响进行了实证研究.研究表明:货币供给扩张和利率紧缩都对房价产生稳定的长期拉动效应,但是房价上涨对货币供给的影响侧重于短期的收缩效应,而对利率的影响则偏重于长期的拉动作用;信贷扩张对房价存在为长期的推动作用,而房价上涨对信贷同时存在短期的拉动效应和长期的推动作用.基于此,本文认为货币供给工具和信贷工具以盯住房价为目标是可行的,而利率工具不宜盯住房价.     

Price Volatility of Commercial and Residential Property

This article studies the relative volatility of commercial and residential property prices. Empirical evidence of commercial property prices being more volatile than the prices of residential property is presented. Models are built following that of Lucas. Theoretical statements are derived to show the exact conditions under which the observations arise. The cases of fixed supply and flexible supply are considered separately.     

我国银行和地产类股价波动性对比研究

本文通过描述性统计和建立GARCH族模型,以2008年1月2日至2013年7月11日的银行和地产类股票日收盘价数据作为样本,对我国银行和地产类股指日收益率的波动性进行了对比研究。得到以下结论：银行和地产两类股票收益率序列都是平稳的,具有“尖峰厚尾”的特点,具有波动聚集性;两类收益率的波动均具有“长期记忆性”;均存在非对称效应。