Price discovery in a market under stress: the U.S. Treasury market in fall 1998

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Price discovery in a market under stress: the U.S. Treasury market in fall 1998

Author Info

Craig H. Furfine
Eli M. Remolona

Abstract

We analyze how price discovery in the inter- dealer market for U.S. Treasury securities differs between stressful times and normal periods. Using tick-by-tick data on inter-dealer transactions in the on-the- run two-year, five-year and 10-year Treasury notes, we find that the impact of trades on prices tends to become significantly stronger on stressful days. This effect remains after accounting for the faster trading, wider spreads, and shallower depth observed on stressful days

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-05-06.

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Date of creation: 2005
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Handle: RePEc:fip:fedhwp:wp-05-06

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NEP-ALL-2005-11-05 (All new papers)
NEP-FMK-2005-11-05 (Financial Markets)

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