Current Search: Shao, Haimei (x)
-
-
Title
-
PRICE DISCOVERY IN THE U.S. BOND MARKETS: TRADING STRATEGIES AND THE COST OF LIQUIDITY.
-
Creator
-
Shao, Haimei, Yong, Jiongmin, University of Central Florida
-
Abstract / Description
-
The world bond market is nearly twice as large as the equity market. The goal of this dissertation is to study the dynamics of bond price. Among the liquidity risk, interest rate risk and default risk, this dissertation will focus on the liquidity risk and trading strategy. Under the mathematical frame of stochastic control, we model price setting in U.S. bond markets where dealers have multiple instruments to smooth inventory imbalances. The difficulty in obtaining the optimal trading...
Show moreThe world bond market is nearly twice as large as the equity market. The goal of this dissertation is to study the dynamics of bond price. Among the liquidity risk, interest rate risk and default risk, this dissertation will focus on the liquidity risk and trading strategy. Under the mathematical frame of stochastic control, we model price setting in U.S. bond markets where dealers have multiple instruments to smooth inventory imbalances. The difficulty in obtaining the optimal trading strategy is that the optimal strategy and value function depend on each other, and the corresponding HJB equation is nonlinear. To solve this problem, we derived an approximate optimal explicit trading strategy. The result shows that this trading strategy is better than the benchmark central symmetric trading strategy.
Show less
-
Date Issued
-
2011
-
Identifier
-
CFE0003633, ucf:48858
-
Format
-
Document (PDF)
-
PURL
-
http://purl.flvc.org/ucf/fd/CFE0003633