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A substitution effect between price clustering and size clustering in credit default swaps

Research output: Contribution to journal › Article › peer-review

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A substitution effect between price clustering and size clustering in credit default swaps. / Meng, Lei; Verousis, Thanos; ap Gwilym, Owain.
In: Journal of International Financial Markets, Institutions and Money, Vol. 24, No. April, 01.04.2013, p. 139-152.

Research output: Contribution to journal › Article › peer-review

HarvardHarvard

Meng, L, Verousis, T & ap Gwilym, O 2013, 'A substitution effect between price clustering and size clustering in credit default swaps', Journal of International Financial Markets, Institutions and Money, vol. 24, no. April, pp. 139-152. https://doi.org/10.1016/j.intfin.2012.11.011

APA

Meng, L., Verousis, T., & ap Gwilym, O. (2013). A substitution effect between price clustering and size clustering in credit default swaps. Journal of International Financial Markets, Institutions and Money, 24(April), 139-152. https://doi.org/10.1016/j.intfin.2012.11.011

CBE

Meng L, Verousis T, ap Gwilym O. 2013. A substitution effect between price clustering and size clustering in credit default swaps. Journal of International Financial Markets, Institutions and Money. 24(April):139-152. https://doi.org/10.1016/j.intfin.2012.11.011

MLA

Meng, Lei, Thanos Verousis, and Owain ap Gwilym. "A substitution effect between price clustering and size clustering in credit default swaps". Journal of International Financial Markets, Institutions and Money. 2013, 24(April). 139-152. https://doi.org/10.1016/j.intfin.2012.11.011

VancouverVancouver

Meng L, Verousis T, ap Gwilym O. A substitution effect between price clustering and size clustering in credit default swaps. Journal of International Financial Markets, Institutions and Money. 2013 Apr 1;24(April):139-152. Epub 2012 Dec 8. doi: 10.1016/j.intfin.2012.11.011

Author

Meng, Lei ; Verousis, Thanos ; ap Gwilym, Owain. / A substitution effect between price clustering and size clustering in credit default swaps. In: Journal of International Financial Markets, Institutions and Money. 2013 ; Vol. 24, No. April. pp. 139-152.

RIS

TY - JOUR

T1 - A substitution effect between price clustering and size clustering in credit default swaps

AU - Meng, Lei

AU - Verousis, Thanos

AU - ap Gwilym, Owain

PY - 2013/4/1

Y1 - 2013/4/1

N2 - In a perfectly liquid market, investors’ optimal allocation decisions refer to maximizing all three dimensions of liquidity, namely immediacy, width and depth. To the extent that investors fail to accommodate size (depth) along with price (width) in their optimal allocation decisions, their overall costs may increase. This paper focuses on the substitution of width and depth by investigating the simultaneous determination of price clustering and size clustering in the credit default swap (CDS) market. We report strong evidence that when traders round prices they tend to quote more refined sizes, and vice versa. The findings highlight a clear trade-off between price clustering and notional amount in the CDS market, and contribute to the emerging literature on size clustering.

AB - In a perfectly liquid market, investors’ optimal allocation decisions refer to maximizing all three dimensions of liquidity, namely immediacy, width and depth. To the extent that investors fail to accommodate size (depth) along with price (width) in their optimal allocation decisions, their overall costs may increase. This paper focuses on the substitution of width and depth by investigating the simultaneous determination of price clustering and size clustering in the credit default swap (CDS) market. We report strong evidence that when traders round prices they tend to quote more refined sizes, and vice versa. The findings highlight a clear trade-off between price clustering and notional amount in the CDS market, and contribute to the emerging literature on size clustering.

U2 - 10.1016/j.intfin.2012.11.011

DO - 10.1016/j.intfin.2012.11.011

M3 - Article

VL - 24

SP - 139

EP - 152

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

SN - 1042-4431

IS - April

ER -