Special repo rates: an empirical analysis

Article Abstract:

Duffie (1996) examines the theoretical impact of repo "specials" on the prices of Treasury securities and concludes that, all else the same, an issue on special will carry a higher price than an otherwise identical issue. We examine this hypothesis and find strong evidence in support of it. We also examine whether the liquidity premium associated with "on-the-run" issues is due to repo specialness and find evidence of a distinct effect. Finally, we investigate whether auction tightness and percentage awarded to dealers are related to subsequent specialness and find that both variables are generally significant. (Reprinted by permission of the publisher.)

Prices and rates, Repurchase agreements

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Salomon Brothers and the May 1991 Treasury auction: analysis of a market corner

Article Abstract:

Salomon Brothers' attempts to corner the market on Treasury notes in 1991 are examined. Through improper bidding, the investment bank was able to gain control of at least 86% of the two-year notes worth $12.29 billion sold by the Treasury Dept. on May 22, 1991. This was in violation of the rule prohibiting one bidder from acquiring more than 35% of the securities auctioned. Subsequent investigations found that the notes were overpriced six weeks after the auction, which would have generated millions for Salomon.

Security and Commodity Services, Securities & Commodities Services, Securities, Commodity Contracts, and Other Financial Investments and Related Activities, Case studies, Investigations, Securities industry, Manipulation (Securities), Salomon Brothers Inc.

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Some empirical tests in the Arbitrage Pricing Theory: macrovariables vs. derived factors

Article Abstract:

Ananalysis of two models based on the Arbitrage Pricing Theory (APT) is presented. The analysis focuses on the ability of the models in forecasting portfolio returns from 1971-1986. The factor loading model has factors which are generated by factor analysis and are unspecified. The macroeconomic variable model defines factors as innovations among a set of microvariables. Itis shown that two models have minimal differences.

Research, Models, Pricing, Prices

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