The order flow of discount certificates and issuer pricing behavior

Rainer Baule

Journal of Banking & Finance, 2011, vol. 35, issue 11, 3120-3133

Abstract: We analyze the order flow of discount certificates, its dependence on product age, and the implications for issuer pricing behavior. Based on a unique data set of exchange trades and issuer quotes, we find that for tax reasons investors prefer to buy products that mature in just over 1Â year from the date of purchase. Furthermore, they tend to sell products back preferably close to maturity. These patterns in the trade direction allow us to separate the issuer pricing behavior from (i) the life cycle and (ii) the order flow. We find evidence that 7 out of 11 issuers anticipate the order flow and price in an additional margin in phases of positive expected net sales.

Keywords: Discount; certificate; Life; cycle; Order; flow; Structured; financial; product (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:35:y:2011:i:11:p:3120-3133

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