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Price Manipulation (price + manipulation)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Studies on Information Asymmetry, Price Manipulation and Investor Performances,

ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 6 2008
Jin Yoo
Abstract In this paper, we examine optimal investment strategies of informed traders in an equity market, where well informed and not so well informed traders as well as noise traders coexist. Naturally, less informed traders follow more informed counterparts because of informational advantage. On the other hand, more informed investors can take advantage of less informed investors' trust by manipulating prices. Often, by inflating or deflating the equity prices, more informed traders make greater profits than less informed traders do. Over time, less informed traders become aware of the others' strategy, thereby a long-term equilibrium is to be attained, in which the more informed mixes his sincere and cheating strategy, and the less informed mixes his trust and distrust strategy. This model can be especially useful in understanding emerging markets, where foreign investors, local institutions, and local individuals are often characterized as more informed, less informed, and noise traders, respectively. [source]

The Economics of IPO Stabilisation, Syndicates and Naked Shorts

EUROPEAN FINANCIAL MANAGEMENT, Issue 4 2007
Tim Jenkinson
G3; G24 Abstract Stabilisation is the bidding for and purchase of securities by an underwriter immediately after an offering for the purpose of preventing or retarding a fall in price. Stabilisation is price manipulation, but regulators allow it within strict limits , notably that stabilisation may not occur above the offer price. For legislators and market authorities, a false market is a price worth paying for an orderly market. This paper compares the rationale for regulators' allowing IPO stabilisation with its effects. It finds that stabilisation does have the intended effects, but that underwriters also seem to have other motives to stabilise, including favouring certain aftermarket sellers and enhancing their own reputation and profits. A puzzling aspect of stabilisation is why underwriters create ,naked short' positions which are loss-making to cover when, as is usual, the aftermarket price rises to a premium. We set up a model to show that the lead underwriter may profit from a naked short at the expense of the rest of the syndicate given the way commissions are apportioned between them. We argue that a naked short mitigates the misalignment of interests which stabilisation causes between issuer and lead underwriter, although it does so at the expense of the non-lead underwriters. [source]

Step-reset options: Design and valuation

THE JOURNAL OF FUTURES MARKETS, Issue 2 2002
L. Paul Hsueh
This study proposes a new design of reset options in which the option's exercise price adjusts gradually, based on the amount of time the underlying spent beyond prespecified reset levels. Relative to standard reset options, a step-reset design offers several desirable properties. First of all, it demands a lower option premium but preserves the same desirable reset attribute that appeals to market investors. Second, it overcomes the disturbing problem of delta jump as exhibited in standard reset option, and thus greatly reduces the difficulties in risk management for reset option sellers who hedge dynamically. Moreover, the step-reset feature makes the option more robust against short-term price movements of the underlying and removes the pressure of price manipulation often associated with standard reset options. To value this innovative option product, we develop a tree-based valuation algorithm in this study. Specifically, we parameterize the trinomial tree model to correctly account for the discrete nature of reset monitoring. The use of lattice model gives us the flexibility to price step-reset options with American exercise right. Finally, to accommodate the path-dependent exercise price, we introduce a state-to-state recursive pricing procedure to properly capture the path-dependent step-reset effect and enhance computational efficiency. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22:155,171, 2002 [source]

Transfer prices and the structure of intra-firm trade

CANADIAN JOURNAL OF ECONOMICS, Issue 1 2000
Vibhas Madan
In this paper the structure of intra-firm trade within the context of transfer price manipulation by a multinational firm is endogenized. ,High' and ,low' values of host-country tax rates give rise to intra-firm trade in final goods and intermediate inputs, and ,intermediate' values of the tax rate are associated with intra-firm trade in either the intermediate inputs or the final goods only. Higher tariffs and stricter local content restrictions bias intra-firm trade towards intermediate-good trade and final-good trade, respectively. In the presence of endogenous transfer prices host-country sales may increase if the multinational faces stricter trade restrictions and higher host-country tax rates. JEL Classification: F23, F12 Prix de cession interne et structure du commerce itnra-firme. Ce mémoire endogénéise la structure du commerce intra-firme dans le contexte d'un modèle qui permet la manipulation du prix de cession interne par une firme plurinationale. Des taux de taxation hauts et bas par le pays hôte entraînent un commerce international intra-firme tant dans les biens finaux que dans les intrants intermédiaires; des taux moyens de taxation sont associés à un commere intra-firme soit dans les intrants intermédiaires, soit dans les biens finaux mais pas dans les deux. Des droits de douane élevés et des restrictions sur le contenu intérieur plus importantes créent des distorsions en faveur du commerce intra-firme dans les biens intermédiaires et dans les biens finaux respectivement. Quand il existe des prix de cession interne endogènes, les ventes de la firme nationale peuvent s'accroître si la firme plurinationale fait face à des restrictions au commerce plus importantes et à des taux de taxation plus élevés de la part du pays hôte. [source]