Working Paper

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


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

Keywords: Prices; Liquidity (Economics);

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2005

Number: WP-05-06