Modelling Trade Duration in U.S. Treasury Markets

23 Pages Posted: 2 Dec 2010

See all articles by Michael D. McKenzie

Michael D. McKenzie

The University of Sydney - Discipline of Finance; University of Cambridge - Cambridge Endowment for Research in Finance (CERF); Financial Research Network (FIRN)

Olan T. Henry

University of Melbourne - Department of Economics

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF)

Date Written: November 29, 2010

Abstract

This paper models the trading intensity of the US Treasury bond market, which has a unique expandable limit order book that distinguishes it from other asset markets. The results indicate that the trade duration exhibits significant clustering and threshold effects. Further, the time taken to expand the tradable volume, known as ‘workup’, significantly decreases the time between consecutive trades. Finally, we find that trade duration falls in the presence of scheduled news releases, but not by the size of the surprise in that news.

Keywords: US Treasuries, trade duration, workups, news

JEL Classification: C22, G14

Suggested Citation

McKenzie, Michael David and Henry, Olan T. and Dungey, Mardi, Modelling Trade Duration in U.S. Treasury Markets (November 29, 2010). Available at SSRN: https://ssrn.com/abstract=1718179 or http://dx.doi.org/10.2139/ssrn.1718179

Michael David McKenzie (Contact Author)

The University of Sydney - Discipline of Finance ( email )

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University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

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Financial Research Network (FIRN)

C/- University of Queensland Business School
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Queensland
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HOME PAGE: http://www.firn.org.au

Olan T. Henry

University of Melbourne - Department of Economics ( email )

Victoria 3010, 3010
Australia
+613 3 8344 5312 (Phone)
+613 3 8344 6899 (Fax)

HOME PAGE: http://melbecon.unimelb.edu.au/staffprofile/ohenry/home.html

Mardi Dungey

University of Cambridge - Cambridge Endowment for Research in Finance (CERF) ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://www.dungey.bigpondhosting.com

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