Risk Management with Derivatives by Dealers and Market Quality in Government Bond Markets

This paper examines how bond dealers use futures markets to manage the hedgeable market risk component of their core business risk exposure, and whether market quality is adversely affected by their selective risk taking activity. It also investigates the efficiency of market risk sharing within a decentralized semi-transparent market structure. We find that dealers engage in duration targeting, behaving as if they have a comparative advantage in bearing interest rate risk. They make significant directional bets often by holding futures that are in the same direction as the spot. They actively use futures to hedge changes in the spot exposure. They hedge changes in their spot exposure more when the potential costs of regulatory distress are high, when the cost of such hedging is low, and during periods of greater uncertainty. We find that duration targeting by dealers has adverse price effects due to capital constraints as predicted by Froot and Stein (1998). Finally, we find that trades in the spot market are not executed by dealers with extreme exposures. In this context, we recommend market reforms such as introduction of central quote posting or limit order book that will enable more efficient matching of liquidity demanders and suppliers, reduce trading costs, and improve the quality of risk sharing

Risk Management with Derivatives by Dealers and Market Quality in Government Bond Markets

This paper examines how bond dealers use futures markets to manage the hedgeable market risk component of their core business risk exposure, and whether market quality is adversely affected by their selective risk taking activity. It also investigates the efficiency of market risk sharing within a decentralized semi-transparent market structure. We find that dealers engage in duration targeting, behaving as if they have a comparative advantage in bearing interest rate risk. They make significant directional bets often by holding futures that are in the same direction as the spot. They actively use futures to hedge changes in the spot exposure. They hedge changes in their spot exposure more when the potential costs of regulatory distress are high, when the cost of such hedging is low, and during periods of greater uncertainty. We find that duration targeting by dealers has adverse price effects due to capital constraints as predicted by Froot and Stein (1998). Finally, we find that trades in the spot market are not executed by dealers with extreme exposures. In this context, we recommend market reforms such as introduction of central quote posting or limit order book that will enable more efficient matching of liquidity demanders and suppliers, reduce trading costs, and improve the quality of risk sharing

Do Correlated Exposures Influence Intermediary Decision-making? Evidence from Trading Behavior of Equity Dealers

This paper investigates whether dealers’ trading and pricing decisions are governed by their equivalent inventories (based on total returns as in Ho and Stoll, 1983 or on unhedgeable returns as in Froot and Stein, 1998) or by their ordinary inventories, as would be the case in a decentralized market-making organizational structure. It finds that ordinary inventories, and not equivalent inventories best explain dealers’ quote placement strategy, which dealer executes trades and the quality of execution offered to the trades. This finding is consistent with decentralized market making where, due to information sharing difficulties or the nature of compensation contracts, individual dealers care only about risk of stocks managed by them, and not the positions of other dealers within the firm

An improved magnetic field simulator - MAGFLD.

An improved two-dimensional simulator MAGFLD has been developed which is useful for the design and simulation of periodic permanent magnet (PPM) focusing system for linear beam tubes. At present, input is possible only through the input file, which is very simple and user friendly. A complete PPM circuit is generated using the coordinates of first pole piece, first magnet, gun adapter (if the structure is a-periodic) and the region of computation. Small mesh units of either square or rectangular shapes can be used with mesh refinement capability in one or more regions in any or both directions for better accuracy of the solution. Materials with different magnetic permeability can be modeled by defining a characteristic value for each mesh point of the geometry. The effective potential value at each point in the region of interest is calculated based on the vector potential model by using the 5-point finite difference method and the solution is achieved by over relaxation technique for faster convergence. This package has an interface with EGUN to model the electron gun and collector under the influence of magnetic field. Versatile color graphics are capable of plotting both axial magnetic field and flux lines along with the magnetic circuit. MAGFLD has been validated against some published data and experimental results

Risk Management with Derivatives by Dealers and Market Quality in Government Bond Markets

This paper examines how bond dealers use futures markets to manage the hedgeable market risk component of their core business risk exposure, and whether market quality is adversely affected by their selective risk taking activity. It also investigates the efficiency of market risk sharing within a decentralized semi-transparent market structure. We find that dealers engage in duration targeting, behaving as if they have a comparative advantage in bearing interest rate risk. They make significant directional bets often by holding futures that are in the same direction as the spot. They actively use futures to hedge changes in the spot exposure. They hedge changes in their spot exposure more when the potential costs of regulatory distress are high, when the cost of such hedging is low, and during periods of greater uncertainty. We find that duration targeting by dealers has adverse price effects due to capital constraints as predicted by Froot and Stein (1998). Finally, we find that trades in the spot market are not executed by dealers with extreme exposures. In this context, we recommend market reforms such as introduction of central quote posting or limit order book that will enable more efficient matching of liquidity demanders and suppliers, reduce trading costs, and improve the quality of risk sharing

Do Correlated Exposures Influence Intermediary Decision-making? Evidence from Trading Behavior of Equity Dealers

This paper investigates whether dealers’ trading and pricing decisions are governed by their equivalent inventories (based on total returns as in Ho and Stoll, 1983 or on unhedgeable returns as in Froot and Stein, 1998) or by their ordinary inventories, as would be the case in a decentralized market-making organizational structure. It finds that ordinary inventories, and not equivalent inventories best explain dealers’ quote placement strategy, which dealer executes trades and the quality of execution offered to the trades. This finding is consistent with decentralized market making where, due to information sharing difficulties or the nature of compensation contracts, individual dealers care only about risk of stocks managed by them, and not the positions of other dealers within the firm

Low-temperature Synthesis of FeTe0.5Se0.5 Polycrystals with a High Transport Critical Current Density

We have prepared high-quality polycrystalline FeTe0.5Se0.5 at temperature as low as 550{\deg}C. The transport critical current density evaluated by the current-voltage characteristics is over 700 A/cm2 at 4.2 K under zero field, which is several times larger than FeTe0.5Se0.5 superconducting wires. The critical current density estimated from magneto-optical images of flux penetration is also similar to this value. The upper critical field of the polycrystalline FeTe0.5Se0.5 at T = 0 K estimated by Werthamer-Helfand-Hohenberg theory is 585 kOe, which is comparable to that of single crystals. This study gives some insight into how to improve the performance of FeTe0.5Se0.5 superconducting wires.Comment: 12 pages, 6 figure

Lack of clustering in low-redshift 21-cm intensity maps cross-correlated with 2dF galaxy densities

We report results from 21-cm intensity maps acquired from the Parkes radio telescope and cross-correlated with galaxy maps from the 2dF galaxy survey. The data span the redshift range $0.057<z<0.098$ and cover approximately 1,300 square degrees over two long fields. Cross correlation is detected at a significance of $5.18\sigma$. The amplitude of the cross-power spectrum is low relative to the expected dark matter power spectrum, assuming a neutral hydrogen (HI) bias and mass density equal to measurements from the ALFALFA survey. The decrement is pronounced and statistically significant at small scales. At $k\sim1.5$ $h \mathrm{Mpc^{-1}}$, the cross power spectrum is more than a factor of 6 lower than expected, with a significance of $14.8\,\sigma$. This decrement indicates either a lack of clustering of neutral hydrogen (HI), a small correlation coefficient between optical galaxies and HI, or some combination of the two. Separating 2dF into red and blue galaxies, we find that red galaxies are much more weakly correlated with HI on $k\sim1.5$ $h \mathrm{Mpc^{-1}}$ scales, suggesting that HI is more associated with blue star-forming galaxies and tends to avoid red galaxies.Comment: 12 pages, 3 figures; fixed typo in meta-data title and paper author