The Cost of Immediacy for Corporate Bonds

Research output: Contribution to conferencePaper

Liquidity provision in the corporate bond market has become significantly more expensive after the 2008 credit crisis. Using index exclusions as a natural experiment during which uninformed index trackers request immediacy, we find that the price of immediacy has doubled for short-term investment grade bonds, and more than tripled for speculative-grade bonds. The increased cost of immediacy is a side-effect of a ban on proprietary trading (Volker Rule) and tighter post-crisis capital regulations, which have resulted in lower aggregate dealer inventories.

Publication information

Original languageEnglish
Publication date2017
Number of pages38
StatePublished - 2017
EventThe 77th Annual Meeting of American Finance Association. AFA 2017 - Sheraton Grand Chicago, Chicago, United States
Duration: 6 Jan 20178 Jan 2017
Conference number: 77


ConferenceThe 77th Annual Meeting of American Finance Association. AFA 2017
LocationSheraton Grand Chicago
CountryUnited States
Internet address

    Research areas

  • Dealer inventory, Lehman/Barclay bond index, Market making, Transaction costs, Dodd-Frank Act

ID: 55334691