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Marking to two-price markets

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Abstract

Economic equilibria permitting prices that differ with the trade direction are formulated. As a consequence mark to market is transformed to a mark to two-price market system. The conservatism of the latter is then termed CoCoCoA for continuously contemporary conservative accounting. Both marking systems are implemented for 77 businesses trading mean reversion of performance measures from November 2005 to July 2015. The two accounting systems reveal substantial differences in how the enterprises are ranked.

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Authors and Affiliations

  1. Robert H. Smith School of Business, University of Maryland, College Park, 20742, MD, USA

    Dilip B Madan

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  1. Dilip B Madan
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Correspondence to Dilip B Madan.

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1Dilip B. Madan is a Professor of Mathematical Finance at the Robert H. Smith School of Business of the University of Maryland. He serves on the Advisory Board of Mathematical Finance. He was a past President of the Bachelier Finance Society. He also is a consultant to Morgan Stanley in Equity Derivatives Research since 1996 and a consultant to Norges Bank Investment Management since 2012. He has published over 150 papers in journals world wide and was the 2007 Quant of the year at Risk Magazine. He was inducted into the Circle of Discovery of the College of Computer, Mathematical and Natural Sciences in 2014.

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Madan, D. Marking to two-price markets. J Asset Manag 17, 100–118 (2016). https://doi.org/10.1057/jam.2015.42

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  • DOI: https://doi.org/10.1057/jam.2015.42

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