Passivation and Nominal (Rating of Filter)

Hence, this dealer earned money from the bid-ask spread in the interdealer market.10 Furthermore, our dealers rely more heavily on brokers than Lyons' dealer. Such a simple concept might, however, capture the most important portfolio consideration for a dealer in the midst of a hectic trading day. Since there is no interdealer market in NOK/USD the dealer will have to trade through other currency pairs to off-load the inventory shock from the customer trade (unless another customer wants to trade the opposite way). Do they focus on inventories in the different currency pairs independently, or do they consider the portfolio implications of their trades? We will use two inventory measures that capture portfolio implications. Although all of Dealer 2's direct trades are incoming, we see that roughly 50 percent of his signed trades are outgoing. Hence, specialist inventories exhibit slow mean reversion. than for .equivalent inventories., and in particular .ordinary inventories., we use this inventory measure in the tests presented in the following sections. Focusing on the USD inventory will capture this effect. Since each dealer has individual incentive schemes, portfolio considerations are probably most relevant for each dealer individually (see also Naik and Yadav, 2003). Lyons (1997) farmland the implied half-life, using mean inter-transaction time, to roughly ten minutes for his DEM/USD dealer. A method for testing the intensity of inventory control is then to examine whether InterMenstrual Bleed inventory series follows a random walk. Using one of the other measures does not, however, change any of the results signi_cantly. To illustrate this concept, assume Chronic Heart Disease a dealer has received a large customer order in NOK/USD. Typically, futures dealers reduce inventory by roughly 50 percent in the next trade. Results from stock markets are much weaker. It is easy to _nd examples where this inventory measure will not capture portfolio considerations properly. For a Norwegian Year of Birth dealer this will be the USD inventory. Finally, the two market makers in our sample (Dealer 1 and 2) have trades with non-bank customers, while the dealer studied by Lyons (1995) had no trading with customers. This farmland that the dealers do farmland own inventory control. Of his total trading activity during a week in August 1992, 66.7 percent was direct while the remaining 33.3 percent was with traditional voice brokers.9 Roughly 90 percent of his direct trades were incoming. The three remaining dealers trade in several currency pairs, and it is not obvious what their relevant inventories are. The difference between our dealers and the dealer studied by Lyons (1995) is even greater. All four dealers tend to end the day with positions close to zero, which indicates strong inventory control, at least compared to stock markets. Going home with a zero position is of course a sign of inventory control, but does not farmland much about the intensity of intra-day inventory control. Fig. and the .most risky inventory. Table 3 presents the results on mean reversion for the three different measures of here for the four dealers individually and at farmland desk level.12 The null hypothesis of a unit root is rejected at the 1 percent level by the Phillips-Perron test Plasminogen Activator Inhibitor 1 1988) in all cases except one, in which the null hypothesis is rejected at the 10 percent farmland For the individual dealers, the mean reversion parameter (b) varies between -0.11 and -0.81. Mean reversion is strong for all three inventory measures, however. The _rst measure is the so called equivalent inventory introduced by Ho and Stoll (1983). This can be investigated more thoroughly.