Strategic trading and manipulation with spot market power

When a spot market monopolist has a position in a corresponding futures market, he has an incentive to deviate from the spot market optimum to make this position more profitable. Rational futures market makers take this 
When a spot market monopolist has a position in a corresponding futures market, he has an incentive to deviate from the spot market optimum to make this position more profitable. Rational futures market makers take this into account when setting prices. We show that the monopolist, by randomizing his futures market position, can strategically exploit his market power at the expense of other futures market participants. Furthermore, traders without market power can manipulate futures prices by hiding their orders behind the monopolist's strategic trades. The moral hazard problem stemming from spot market power thus provides a venue for strategic trading and manipulation that parallels the adverse selection problem stemming from inside information. Klassifikation: D82, G13
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Metadaten
Author:Alexander Muermann, Stephen H. Shore
URN:urn:nbn:de:hebis:30-25980
Series (Serial Number):CFS working paper series (2006, 07)
Document Type:Working Paper
Language:English
Date of Publication (online):2006/05/04
Year of first Publication:2006
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2006/05/04
Tag:manipulation ; spot market power; strategic trading
Source:CFS working paper ; 2006, 07
HeBIS PPN:195428838
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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