Liquidity

When is cross impact relevant? ArXiv ID: 2305.16915 “View on arXiv” Authors: Unknown Abstract Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact relevant to explain the variance of price returns. We show that price formation occurs endogenously within highly liquid assets. Then, trades in these assets influence the prices of less liquid correlated products, with an impact velocity constrained by their minimum trading frequency. We investigate the implications of such a multidimensional price formation mechanism on interest rate markets. We find that the 10-year bond future serves as the primary liquidity reservoir, influencing the prices of cash bonds and futures contracts within the interest rate curve. Such behaviour challenges the validity of the theory in Financial Economics that regards long-term rates as agents anticipations of future short term rates. ...

Bagehot was a Shadow Banker: Shadow Banking, Central Banking, and the Future of GlobalFinance ArXiv ID: ssrn-2232016 “View on arXiv” Authors: Unknown Abstract At the heart of both the modern shadow banking system and the 19th century banking system described by Walter Bagehot is the wholesale money market, with the ce Keywords: shadow banking, wholesale money market, liquidity, banking history, Money Markets Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper is a conceptual, historical, and institutional analysis comparing 19th-century banking to modern shadow banking, with no advanced mathematical models or empirical backtesting presented in the provided excerpt. flowchart TD A["Research Goal: Compare 19th C Bagehot banking to modern shadow banking"] --> B["Methodology: Historical & Institutional Analysis of wholesale money markets"] B --> C["Data/Inputs: Bagehot's "Lombard Street" + Modern Financial Data"] C --> D["Computational Process: Cross-Era Analysis Mapping mechanisms & stability roles"] D --> E{"Key Findings/Outcomes"} E --> F1["1: Wholesale money markets are the structural core"] E --> F2["2: Shadow banking replicates 19th C. banking functions"] E --> F3["3: Central banking role remains crucial for liquidity"]