Does risk sharing motivate interdealer trading?

• 成果类型: Article
• 署名作者: Reiss, PC; Werner, IM
• 署名单位: Stanford University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00068
• 发表日期: 1998
• 页码: 1657-1703
• 关键词: FOREIGN-EXCHANGE; price formation; MARKET; COMPETITION

摘要

We use unique data from the London Stock Exchange to test whether interdealer trade facilitates inventory risk sharing among dealers. We develop a methodology that focuses on periods of extreme inventories-inventory cycles. We further distinguish between inventory cycles that are unanticipated and those that are anticipated because of worked orders. The pattern of interdealer trade during inventory cycles matches theoretical predictions for the direction of trade and the inventories of trade counterparts. We also show that London dealers receive higher trading revenues for taking larger positions.