James T. Moser

Bio: James T. Moser is an academic researcher from American University. The author has contributed to research in topics: Futures contract & Clearing. The author has an hindex of 14, co-authored 51 publications receiving 748 citations. Previous affiliations of James T. Moser include Federal Reserve Bank of Chicago.

Interest-rate derivatives and bank lending

Abstract: We study the relationship between bank participation in derivatives contracting and bank lending for the period 30 June 1985 through the end of 1992. Since 1985 commercial banks have become active participants in the interest-rate derivative products markets as end-users, or intermediaries, or both. Over much of this period significant changes were made in the composition of bank portfolios. We find that banks using interest-rate derivatives experience greater growth in their commercial and industrial (C&I) loan portfolios than banks that do not use these financial instruments. This result is consistent with the model of Diamond (Review of Economic Studies 51, 1984, 393–414) which predicts that intermediaries' use of derivatives enables increased reliance on their comparative advantage as delegated monitors.

Alligators in the Swamp: The Impact of Derivatives on the Financial Performance of Depository Institutions

Abstract: It has been argued that underpriced federal deposit insurance provides incentive for insured institutions to increase the value of shareholder equity by expanding into activities that shift risk onto the deposit insurer. Derivative instruments have been used by firms to change their risk exposure. Permitting firms with substantial moral hazard incentives to utilize interest-rate derivative instruments could lead to higher rather than lower exposure to risk. This article, using a sample of savings and loan associations (S&Ls), examines the proposition that involvement with interest-rate derivatives instruments increases depository institutions' risk. We find that there is a negative correlation between risk and derivatives usage. In addition, S&Ls that used derivatives experienced relatively greater growth in their fixed-rate mortgage portfolios. Copyright 1996 by Ohio State University Press.

Physical Markets, Paper Markets and the WTI-Brent Spread

Abstract: Since the Fall of 2008, the benchmark West Texas Intermediate (WTI) crude oil has periodically traded at unheard-of discounts to the corresponding Brent benchmark. This discount is not reflected in the price spreads between Brent and other benchmarks that are directly comparable to WTI. Drawing on extant models linking oil inventory conditions to the futures term structure, we test empirically several conjectures about how calendar and commodity spreads (nearby vs. first-deferred WTI; nearby Brent vs. WTI) should move over time and be related to storage conditions at Cushing. We then investigate whether, after controlling for macroeconomic and physical market fundamentals, spread behavior is partly predicted by the aggregate oil futures positions of commodity index traders.

Spreads, Information Flows and Transparency Across Trading Systems Federal Reserve Bank of Chicago, Issues in Financial Regulation

Abstract: This paper analyzes the dynamics of price formation for a strictly identical derivatives contract which is traded simultaneously at two competing exchanges. The domestic exchange is situated in the country that issues the underlying instrument. The foreign exchange offers a large international capital centre with many diversificationpossibilities. In addition, the exchanges are characterized by different trading systems. The domestic exchange operates by automated trading, the foreign exchange uses open outcry with an automated late afternoon session. We will investigate whether these differences support the trading system segmentation hypothesis. Our working hypothesis is two-fold. First, we investigate whether the transparency of each trading system affects quote setting. Second, we analyze whether the relative transparency of each market influences the lead/lag relationship between the two markets. Both hypotheses are empirically tested for the Bund futures contract as it is traded in London (LIFFE) and Frankfurt (DTB).

Spreads, information flows and transparency across trading systems

Abstract: This paper analyses the relative merits of an automated versus an open outcry trading system for a derivatives contract which is traded simultaneously at two competing exchanges. The only characterizing difference between these exchanges is the mode of operation. The domestic exchange (listing the underlying asset) operates by automated trading, the foreign exchange uses open outcry. Investigations are made to determine whether this operational competition supports a trading system segmentation hypothesis. First, quote setting is investigated to determine whether or not it is related to the transparency of the trading system. Second, analysis is carried out to determine whether the transparency of the trading system influences the lead/lag relationship in returns and volatility between the two markets. Both hypotheses are empirically tested for the Bund futures contract as it is traded in London (LIFFE) and Frankfurt (DTB).

The theory of externalities, public goods, and club goods: Homogeneous clubs and local public goods

Abstract: A club is a voluntary group of individuals who derive mutual benefit from sharing one or more of the following: production costs, the members' characteristics, or a good characterized by excludable benefits. When production costs are shared and the good is purely private, a private good club is being analyzed (McGuire 1972; Wiseman 1957). If membership characteristics differ and motivate sharing, then membership fees will differ among members (DeSerpa 1977; Scotchmer 1994b; Scotchmer and Wooders 1987). Such fees are nonanonymous , inasmuch as a fee structure is related to the identity and attributes of a member. The focus of our analysis is the sharing of an excludable (rivalrous) public good, which we term a club good . Unless otherwise specified, crowding is assumed to be independent of the individual and hence anonymous. A number of aspects of the club definition deserve highlighting. Privately owned and operated clubs must be voluntary; members choose to belong because they anticipate a net benefit from membership. Thus, the utility jointly derived from membership and from the consumption of other goods must exceed the utility associated with nonmembership status. Furthermore, the net gain in utility from membership must exceed or equal membership fees or toll payments. This voluntarism serves as the first characteristic by which to distinguish between pure public goods and club goods. In the case of a pure public good, voluntarism may be absent, since the good might harm some recipients (e.g., defense to a pacifist, fluoridation to someone who opposes its use).

Speculators, Commodities and Cross-Market Linkages

Abstract: We use a unique, non-public dataset of individual trader positions in 17 U.S. commodity futures markets to provide novel evidence on those markets’ financialization in the past decade. We then show that the correlation between the rates of return on commodities and equities rises amid greater participation by speculators generally, hedge funds especially, and funds that trade in both equity and commodity markets in particular. We find no such relationship for other kinds of commodity futures traders. The predictive power of hedge fund positions is weaker in periods of generalized financial market stress. Our results indicate that who trades helps predict the joint distribution of commodity and equity returns.

Intraday Price Formation in U.S. Equity Index Markets

Abstract: The market for U.S. equity indexes presently comprises floor-traded index futures contracts, exchange-traded funds (ETFs), electronically traded, small-denomination futures contracts (E-minis), and sector ETFs that decompose the S&P 500 index into component industry portfolios. This paper empirically investigates price discovery in this environment. For the S&P 500 and Nasdaq-100 indexes, most of the price discovery occurs in the E-mini market. For the S&P 400 MidCap index, price discovery is shared between the regular futures contract and the ETF. The S&P 500 ETF contributes markedly to price discovery in the sector ETFs, but there are only minor effects in the reverse direction