Musings on the Microstructure of the Market for Risk
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Margin Call (2011) In closing the previous dispatch I offered that we may be missing a theoretical piece of the puzzle. Here I offer some musings on what sort of structure I think we need to get an even better handle on asset prices. My understanding of the microstructure of the dealer ecosystem suggests to me that we have three kinds of market players in the market for risk: sell-side, buy-side, and noise traders. US securities broker-dealers on the sell-side make markets by trading at quoted prices. They also provide funding for the trades which consumes balance sheet capacity (the risk-bearing capacity of the sell-side
Musings on the Microstructure of the Market for Risk
Musings on the Microstructure of the Market…
Musings on the Microstructure of the Market for Risk
Margin Call (2011) In closing the previous dispatch I offered that we may be missing a theoretical piece of the puzzle. Here I offer some musings on what sort of structure I think we need to get an even better handle on asset prices. My understanding of the microstructure of the dealer ecosystem suggests to me that we have three kinds of market players in the market for risk: sell-side, buy-side, and noise traders. US securities broker-dealers on the sell-side make markets by trading at quoted prices. They also provide funding for the trades which consumes balance sheet capacity (the risk-bearing capacity of the sell-side