TY - JOUR
T1 - Ultra-short tenor yield curve for intraday trading and settlement
AU - Golub, Anton
AU - Grossmass, Lidan
AU - Poon, Ser Huang
PY - 2019/9/11
Y1 - 2019/9/11
N2 - Due to the increasing prevalence of high-frequency algorithmic trading and fintech developments like blockchain, there is a shift towards very short trading horizons and immediate settlement. This creates a demand for an ultra-short tenor interest rate curve that is updated in real-time. Our paper develops a practical market model for the equilibrium intraday interest rates which provides market makers adequate incentives to attenuate flash crashes. Our model suggests that the intraday CHF interest rates should have been highly negative during the flash crash of EURCHF on 15 January 2015, which could potentially stop the long CHF short EUR strategy and reduce the severity of the crash.
AB - Due to the increasing prevalence of high-frequency algorithmic trading and fintech developments like blockchain, there is a shift towards very short trading horizons and immediate settlement. This creates a demand for an ultra-short tenor interest rate curve that is updated in real-time. Our paper develops a practical market model for the equilibrium intraday interest rates which provides market makers adequate incentives to attenuate flash crashes. Our model suggests that the intraday CHF interest rates should have been highly negative during the flash crash of EURCHF on 15 January 2015, which could potentially stop the long CHF short EUR strategy and reduce the severity of the crash.
KW - duration and time deformation
KW - flash crash
KW - Intraday yield curve
UR - http://www.scopus.com/inward/record.url?scp=85073962941&partnerID=8YFLogxK
U2 - 10.1080/1351847X.2019.1662821
DO - 10.1080/1351847X.2019.1662821
M3 - Article
AN - SCOPUS:85073962941
SN - 1351-847X
JO - European Journal of Finance
JF - European Journal of Finance
ER -
