Dealer Inventory and the Cost of Immediacy

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

This study shows that the recent 80% decrease in dealer inventories of
corporate bonds has increased the cost of immediacy. For safe bonds which are quickly turned over again by dealers the increase is up to 15%, while for risky bonds which are kept on inventory by dealers the increase is up to 100% on average. The time series of transaction costs is estimated using the natural experiment of corporate bond index exclusions. The exclusions are monthly and information-free events where index trackers seeking to minimize tracking error request immediacy in order to sell close to the exclusion date. The drop in dealer inventories, and thus the rise in transaction costs, is a side-eect of anticipated tighter regulation, primarily Basel III and the Volcker Rule.
Original languageEnglish
Publication date2013
Number of pages46
Publication statusPublished - 2013
Event2013 Fixed Income Conference - Darla Moore School of Business: Looking Beyond Liquidity - Darla Moore School of Business, University of South Carolina, Columbia, SC , United States
Duration: 19 Apr 201320 Apr 2013
Conference number: 2
http://mooreschool.sc.edu/executiveeducation/workshopsconferences/pastworkshopsconferences/2013fixedincomeconference.aspx

Conference

Conference2013 Fixed Income Conference - Darla Moore School of Business
Number2
LocationDarla Moore School of Business, University of South Carolina
CountryUnited States
CityColumbia, SC
Period19/04/201320/04/2013
Internet address

Bibliographical note

CBS Library does not have access tot he material

Cite this

Dick-Nielsen, J. (2013). Dealer Inventory and the Cost of Immediacy. Paper presented at 2013 Fixed Income Conference - Darla Moore School of Business, Columbia, SC , United States.
Dick-Nielsen, Jens. / Dealer Inventory and the Cost of Immediacy. Paper presented at 2013 Fixed Income Conference - Darla Moore School of Business, Columbia, SC , United States.46 p.
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keywords = "Dealer inventory, Lehman/Barclay bond index, Market making, Transaction costs, Dodd-Frank Act",
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Dick-Nielsen, J 2013, 'Dealer Inventory and the Cost of Immediacy' Paper presented at, Columbia, SC , United States, 19/04/2013 - 20/04/2013, .

Dealer Inventory and the Cost of Immediacy. / Dick-Nielsen, Jens.

2013. Paper presented at 2013 Fixed Income Conference - Darla Moore School of Business, Columbia, SC , United States.

Research output: Contribution to conferencePaperResearchpeer-review

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PY - 2013

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Dick-Nielsen J. Dealer Inventory and the Cost of Immediacy. 2013. Paper presented at 2013 Fixed Income Conference - Darla Moore School of Business, Columbia, SC , United States.