Secrets of Finances and Payday Loans

Parlour’s (1998) model considers the choice between market and limit orders to show the working of a limit order book. In her simplified world there are only strategic risk-neutral liquidity traders who are endowed with a different evaluation of the risky asset and arrive randomly at the market to submit either a market order (MO) [...]

But the more cyclical character of the US market and the lower average credit quality of the issuers are not the only reasons that explain the spread differential. Another reason is the different investor base. It was already pointed out that the European corporate bond market is still young, while the US market is well [...]

Geopolitical risks like war and terror can create stress scenarios for all risky asset classes. The geopolitical situation has a strong impact on the risk aversion of investors. The events of September 11, 2001, provide a tragic example after which investors bought safe haven assets such as government bonds and gold at the cost of [...]

Market participants often cite changes in investors’ risk appetite as a possible explanation for developments in global financial markets that cannot be explained by changes of market fundamentals. Indeed, financial crises often seem to coincide with abrupt shifts in market sentiment from risk tolerance to risk avoidance. While fundamentals undoubtedly remain of significant importance, these [...]