ABSTRACT

This study develops a simple spread model to explain whether market dealers behave strategically when using electronic broking services. Our spread model stresses the role of an unexpected liquidity imbalance and its volatility for inventory risk, which contrasts sharply with previous studies that emphasised price volatility as the inventory risk. To capture a dealer’s strategic behaviour, we introduce a new concept of a strategic weighted spread and test this new spread using the full information maximum likelihood method with the GARCH (1,1) process. Daily spread data from 1 January 2006 to 20 December 2016 is used to explore strategic spreading at the end of a trading day in East Asia. Different effects on strategic spreads of liquidity depth in Asian financial markets are also investigated by comparing strategic spreads between the thin and deep markets. The evidence provides support for our hypothesis that a dealer behaves strategically to avoid the unexpected inventory risk, and that the magnitude of this influence depends on the depth of the financial market.

摘要

这项研究建立了一个简单的传播模型，以解释市场交易商在使用电子经纪服务时是否具有战略性行为。我们的利差模型强调了意外的流动性失衡及其对存货风险的波动性的作用，这与先前强调价格波动作为存货风险的研究形成了鲜明的对比。为了捕获交易商的战略行为，我们引入了战略加权利差的新概念，并使用带有GARCH（1,1）流程的全信息最大似然方法来测试此新利差。使用2006年1月1日至2016年12月20日的每日价差数据来探究东亚交易日结束时的策略价差。通过比较瘦弱市场与深层市场之间的战略利差，也研究了对亚洲金融市场流动性深度战略利差的不同影响。证据为我们的假设提供了支持，该假设是交易商采取策略性行为以避免意外的库存风险，而这种影响的程度取决于金融市场的深度。