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The relative importance of information, inventory and price clustering for STIR futures pre- and post-EMU

The relative importance of information, inventory and price clustering for STIR futures pre- and post-EMU
The relative importance of information, inventory and price clustering for STIR futures pre- and post-EMU
This paper applies an established bid-ask spread decomposition model to short-term interest rate (STIR) futures to assess the impact of both the migration from floor to electronic trading and European Monetary Union (EMU). Additionally, the paper presents and tests a modified decomposition model which is specifically adapted to the features of order-driven markets. The latter model provides much improved performance. Price clustering is introduced as a new explanatory factor within this framework and is shown to be vitally important in understanding the bid-ask spread and price determination.
high frequency data, futures, market microstructure, asymmetric information, orderdriven
CRR-05-07
University of Southampton
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Thomas, Stephen H.
a93cfe4e-b533-48ff-b1c1-2e0d4e3bf448
ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34
McGroarty, Frank
693a5396-8e01-4d68-8973-d74184c03072
Thomas, Stephen H.
a93cfe4e-b533-48ff-b1c1-2e0d4e3bf448
ap Gwilym, Owain
dbd356d9-b22d-420b-a980-7341f6d52f34

McGroarty, Frank, Thomas, Stephen H. and ap Gwilym, Owain (2005) The relative importance of information, inventory and price clustering for STIR futures pre- and post-EMU (Discussion Papers in Centre for Risk Research, , (doi:10.2139/ssrn.860284), CRR-05-07) Southampton, UK. University of Southampton 32pp.

Record type: Monograph (Discussion Paper)

Abstract

This paper applies an established bid-ask spread decomposition model to short-term interest rate (STIR) futures to assess the impact of both the migration from floor to electronic trading and European Monetary Union (EMU). Additionally, the paper presents and tests a modified decomposition model which is specifically adapted to the features of order-driven markets. The latter model provides much improved performance. Price clustering is introduced as a new explanatory factor within this framework and is shown to be vitally important in understanding the bid-ask spread and price determination.

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More information

Published date: 2005
Keywords: high frequency data, futures, market microstructure, asymmetric information, orderdriven

Identifiers

Local EPrints ID: 37345
URI: http://eprints.soton.ac.uk/id/eprint/37345
PURE UUID: b605bfa2-893c-4abd-a9fa-3f79278b45a4
ORCID for Frank McGroarty: ORCID iD orcid.org/0000-0003-2962-0927

Catalogue record

Date deposited: 23 May 2006
Last modified: 06 Jun 2018 12:46

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