Read Rational Speculation, Financial Crises, and Optimal Policy Responses

Rational Speculation, Financial Crises, and Optimal Policy Responses

Jay Surti

4.9/5 (18345 ratings)

Description:This paper develops a theory of the onset of financial crises by solving for the optimal trading strategies of speculators in financial markets, in a model where each speculator tries to coordinate her trades with the market's by observing the decisions of other speculators, while simultaneously trying to preempt the market. The interaction and resolution of these two conflicting incentives are analyzed under alternate central bank policy regimes. Our model explains how imperfect information structures prevent traders from exploiting profitable opportunities and suggests how large traders help alleviate this problem by undertaking risky arbitrage early in the investment process, in return for higher profits, if successful. The central bank's defense strategy is a parameter of this model. We compare the likelihood of a crisis under alternate defense strategies and show that credible monetary authorities can provide a better defense of exchange rate regimes against adverse shocks by not disclosing their commitment value to the market.We have made it easy for you to find a PDF Ebooks without any digging. And by having access to our ebooks online or by storing it on your computer, you have convenient answers with Rational Speculation, Financial Crises, and Optimal Policy Responses. To get started finding Rational Speculation, Financial Crises, and Optimal Policy Responses, you are right to find our website which has a comprehensive collection of manuals listed.
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Pages: 30

Format: PDF, EPUB & Kindle Edition

Publisher: Not Avail

Release: 2004

ISBN: 6613775924

Description: This paper develops a theory of the onset of financial crises by solving for the optimal trading strategies of speculators in financial markets, in a model where each speculator tries to coordinate her trades with the market's by observing the decisions of other speculators, while simultaneously trying to preempt the market. The interaction and resolution of these two conflicting incentives are analyzed under alternate central bank policy regimes. Our model explains how imperfect information structures prevent traders from exploiting profitable opportunities and suggests how large traders help alleviate this problem by undertaking risky arbitrage early in the investment process, in return for higher profits, if successful. The central bank's defense strategy is a parameter of this model. We compare the likelihood of a crisis under alternate defense strategies and show that credible monetary authorities can provide a better defense of exchange rate regimes against adverse shocks by not disclosing their commitment value to the market.We have made it easy for you to find a PDF Ebooks without any digging. And by having access to our ebooks online or by storing it on your computer, you have convenient answers with Rational Speculation, Financial Crises, and Optimal Policy Responses. To get started finding Rational Speculation, Financial Crises, and Optimal Policy Responses, you are right to find our website which has a comprehensive collection of manuals listed.
Our library is the biggest of these that have literally hundreds of thousands of different products represented.

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Rational Speculation, Financial Crises, and Optimal Policy Responses

Rational Speculation, Financial Crises, and Optimal Policy Responses

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