2 edition of Why do the LIFFE and DTB bund futures contracts trade at different prices? found in the catalog.
Why do the LIFFE and DTB bund futures contracts trade at different prices?
Includes bibliographical references.
|Statement||[by] Francis Breedon.|
|Series||Working paper series : Bank of England -- no.57|
|Contributions||Bank of England.|
|The Physical Object|
|Number of Pages||19|
I first truly understood how little basis risk was considered when I found Eurodeutschmark bond traders hedging cash positions in Bund futures. One of them eventually tried to explain this odd phenomenon to me by telling me that hedging in a futures contract was better than hedging in cash because the bid/ask spread on LIFFE and later the DTB. When Olof Stenhammar launched Sweden’s Options Market (OM) in , it was the platypus of the derivatives industry: a privately-owned, for .
When the LIFFE floor was in full flow there were a few traders who arbitraged between the prices of Bund futures on LIFFE and the DTB (now Eurex). Both contracts had similar specifications and so this style of trading had little downside. When the markets went screen based, the French Exchange listed a Gilt Futures contract to compete with LIFFE. Liffe regularly has taken a 70% share for the past four years. Lutz hopes that the expansion of terminal points will send more of this business to DTB. To counter Liffe's advantage, and expand the range of domestic instruments to cover the length of the German yield curve, the DTB introduced two new contracts in March
By selling futures when prices are rising and purchasing Looking back over the past few decades, managed futures have consistently as prices fall, their activity can have a outperformed other asset classes such as stocks and bonds. Consider an initial stabilizing effect in volatile markets. investment of $10, invested in In , LIFFE launched a trading platform competing with DTB for trade in German government bond futures. In , in an attempt to win back some of its lost share to LIFFE, DTB lowered its margin requirements and temporarily suspended exchange fees on Bund futures. 26 In mid, NASDAQ, disclosed plans to launch an energy futures exchange.
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Downloadable. The German Bund futures contract is the most important bond futures contract in Europe. It is also unusual in that it trades on competing Exchanges - LIFFE in London and the DTB in Frankfurt.
This paper looks at a surprising aspect of this dually traded contract, namely that the contract trades slightly more expensively ( basis points) in LIFFE than in the DTB. Bund futures are traded in both London (LIFFE) and Frankfurt (DTB) on open outcry and electronic trading platform respectively.
One oddity in this market that has attracted much practitioner comment is that the LIFFE contract has traded slightly more expensively - about basis points - than the DTB one despite an almost identical specification.
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by Francis Breedon,Bank of England edition, in EnglishPages: Downloadable. The Bund (10 year German Government Bond) futures contract is the most actively traded bond contract in Europe; it is traded in both London (LIFFE) and Frankfurt (DTB) on open outcry and electronic trading platforms respectively.
In an attempt to reconcile the conflicting results of earlier studies this paper evalutes the relative liquidity and price discovery roles of these two. Rahi Rohit, "Optimal Incomplete Markets with Asymmetric Information," Journal of Economic Theory, Elsevier, vol.
65(1), pagess Breedon, "Why do the LIFFE and DTB bund futures contracts trade at different prices?," Bank of England working pap Bank of England.
Bessembinder, Hendrik & Seguin, Paul J., "Price Volatility, Trading Volume, and. Since SeptemberBund futures have been traded at the London International Financial Futures Exchange (LIFFE). In November trading in Bund futures was introduced at the Deutsche TerminBörse (DTB) in Frankfurt.
On the one hand, the Deutsche Termin-Börse is one of the exchanges providing the price and number of contracts in each trade. Bund futures contracts are traded in almost an identical design on the London International Financial Futures Exchange (LIFFE) and the Deutsche Terminborse (DTB).
LIFFE uses a floor trading system. Francis Breedon, "Why do the LIFFE and DTB bund futures contracts trade at different prices?," Bank of England working pap Bank of England. Caillaud, Bernard & Jullien, Bruno, "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol.
34(2), pagesSummer. Trading volume of Bund futures during the APT trading hours on the DTB and LIFFE, and the APT market share of volume between August 4, and Febru Dates during which both exchanges were not open have been omitted from the time-series.
Volume figures are in contracts traded. For each of the futures contracts, the trade price series of local and non-local traders are cointegrated. of DTB and LIFFE Bund Contracts. of mispricing of FTSE futures contracts.
Transactions prices 15 minutes LIFFE>DTB n/a DTB>LIFFE Franke and Hess () Transactions prices Daily n/a n/a LIFFE>DTB Kofman and Moser () Transactions prices + LIFFE quotes trade-by-trade/ 1 minute LIFFE=DTB LIFFE⇔ DTB n/a Note: n/a= not applicable.
(1) Another example of dual trading of a major financial futures contract is the. Terminborse (DTB), which are floor-based and electronic markets, respectively.1 The studies show that LIFFE and DTB make similar contribution to the price discovery of the Bund futures.
In his study of price discovery on LIFFE and DTB, Martens () shows that when volatility is. Downloadable. A recent study by Professor Marsh of the London Business School has estimated that sub-underwriters of rights issues (firms that commit to buy up any remaining shares at the end of a rights issue) make an excess profit of 86% of the fee they charge.
Because of this study, the OFT (who originally commissioned it) have argued that underwriting is too expensive and have encouraged.
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(pdf MB). A 'read' is counted each time someone views a publication summary (such as the title, abstract, and list of authors), clicks on a figure, or views or downloads the full-text.
Liffe's story is remarkable because it represents a previously unimaginable event: the flight of a product (the German government currency bond or Bund contract) pioneered and dominated by the largest incumbent futures exchange in Europe (Liffe) to a rival exchange (DTB.
For example, Pirrong () carried out analyses of the Bund (ten-year German government bonds), as well as futures contracts traded on the open outcry and electronic trading platforms in both the London International Financial Futures and Options Exchange (LIFFE) and the Frankfurt Deutscher Turner-Bund (DTB).
Their findings indicated that the. Arbitrage - Example Consider the simple case of two Bund futures contracts to deliver DM, in face value of German bonds at time T, One traded in London on LIFFE and the other in Frankfurt on DTB.
Suppose for the moment that these contracts are exactly the same. Suppose finally that at some point in time t the first contract sells for. definition suggests. Consider the simple case of two Bund futures contracts to deliver DM,OOO in face value of German bonds at time T, one traded in London on LIFFE and the other in Frankfurt on DTB.
Suppose for the mo-ment, counter factually, that these contracts are exactly the same. Suppose. Daily and monthly closing prices, cash prices, futures volume and other variables were collected from Thomson DataStream, Futures Industry, and Futures and Options World (FOW) Trade Databases for the period from January 1, to Febru A comparison of DTB and LIFFE Bund contracts.
Journal of Futures Markets, 16 (), pp. Consider the simple case of two Bund futures contracts to deliver DM, in face value of German bonds at time T, one traded in London on LIFFE and the other in Frankfurt on DTB. Suppose for the moment, counter factually, that these contracts are exactly the same.trade on both the London International Financial Futures Exchange (LIFFE) and the Deutsche Terminborse (DTB), which are ﬂoor-based and electronic markets, respectively.1 The studies show that LIFFE and DTB make similar contributions to the price discovery of the Bund futures.
In his study of price discovery on LIFFE and DTB, Martens (