Thursday, January 26, 2012

Finance Research Papers

Here are some papers of interest I ran into recently:

  • Price Discovery in the U.S. Treasury Market: The Impact of Orderflow and Liquidity on the Yield Curve (2004) is a paper which outlines the structure, actors, and factors in the Treasury market. The author studies how price discovery reacts to information release.
  • Microstructure of US Treasuries (2007) from the St. Louis Fed. It suggests using the Hasbrouck model for order flow modeling purposes though it does not actually do any analysis using the bivariate vector autoregression. The paper is basically a survey of literature on price jumps (discontinuities) due to macro events, and order flow studies plus an overview of the Treasury market. It cites the Financial Times observation that hedge funds now account for 80% of the trade volume in the Treasury market and Citadel alone accounts for 10%, indicating that high-frequency had reached the Treasury market by 2007 when the article was published. It makes the observation that it was surprising to see how long it too for this to happen.

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