[Research Seminar 2017.10.27]The More Efficient, the More Vulnerable!Speaker : Dong Hyun Ahn/President Seoul national university Korea Capital Market Institute
We extend the limited arbitrage model of Shleifer and Vishny (1997) to an intertem-poral model while simplifying a funding cost structure. The model implies that the equilibrium price is more volatile during a crash than during a tranquil market period. More importantly, a seemingly more eﬃcient market is more vulnerable to a crash and shows more extreme tail volatility and a larger diﬀerence between tail volatility and non-tail volatility. We empirically examine such implications in a U.S. interest rate swap market. The mean-reversion speeds of slope and butterﬂy spreads between swap yields are strongly associated with tail behavior of those spreads, which is in compliance with our model.
Audience : 교수, 대학원생
Department : 경영학부/공학부