Are Intermediary Constraints Priced?

Wenxin Du, Benjamin Hebert and Amy Wang Huber

No 26009, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Violations of no-arbitrage conditions measure the shadow cost of intermediary constraints. Intermediary asset pricing and intertemporal hedging together imply that the risk of these constraints tightening is priced. We describe a “forward CIP trading strategy” that bets on CIP violations shrinking and show that its returns help identify the price of this risk. This strategy yields the highest returns for currency pairs associated with the carry trade. The strategy’s risk contributes substantially to the volatility of the stochastic discount factor, is correlated with both other near-arbitrages and intermediary wealth measures, and appears to be priced consistently across various asset classes.

JEL-codes: F31 G12 G15 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-ore
Note: AP IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Wenxin Du & Benjamin Hébert & Amy Wang Huber & Stefano Giglio, 2023. "Are Intermediary Constraints Priced?," The Review of Financial Studies, vol 36(4), pages 1464-1507.

Downloads: (external link)
http://www.nber.org/papers/w26009.pdf (application/pdf)

Related works:
Journal Article: Are Intermediary Constraints Priced? (2023)
Working Paper: Are Intermediary Constraints Priced? (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:26009

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w26009

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().