The Cost of Immediacy for Corporate Bonds

Jens Dick-Nielsen, Marco Rossi

Publikation: KonferencebidragPaperForskningpeer review

Abstrakt

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.
OriginalsprogEngelsk
Publikationsdato2017
Antal sider38
StatusUdgivet - 2017
BegivenhedThe 77th Annual Meeting of American Finance Association. AFA 2017 - Sheraton Grand Chicago, Chicago, USA
Varighed: 6 jan. 20178 jan. 2017
Konferencens nummer: 77
http://www.afajof.org/details/page/8672741/Paper-Submission-2017.html

Konference

KonferenceThe 77th Annual Meeting of American Finance Association. AFA 2017
Nummer77
LokationSheraton Grand Chicago
LandUSA
ByChicago
Periode06/01/201708/01/2017
Internetadresse

Emneord

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

Citationsformater

Dick-Nielsen, J., & Rossi, M. (2017). The Cost of Immediacy for Corporate Bonds. Afhandling præsenteret på The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, USA.