Abstract
In this chapter, we conduct another case study. In particular, we will move from a retrospective of the Volmageddon to a forward-looking study of the US high yield corporate bond markets, in the presence of majority agents. The majority agents are authorized participants (APs) in bond ETFs and to a lesser extent, investors in certain mutual funds. Beyond a certain size, bond market liquidity can no longer support the ETF arbitrage mechanism. This implies that a purely technical equity flash crash can cause lasting damage to the bond market. We combine a survey-based price impact estimate with a model of mutual fund flows to calculate the potential fallout from a limit down move in various high yield ETFs.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
