Estimating Asset Costs for TARP/PPIF in a Market Making Framework & BICs - a knol by Phil Kongtcheu

Estimating Asset Costs for TARP in a Market Making Framework & BICs - a knol by Phil Kongtcheu


This article is a follow-up to the knol article "Fair Value Pricing, Government Market Making and TARP" and uses the concept introduced in the knol article " Introduction to Basis Instruments Contracts (BICs) for Mathematics, Finance, and Economics".

In this article we seek to estimate the proportion of assets ultimately held by the Government in a market making model, their cost and the parameters needed to make such estimates.

An important financial insight of this analysis is that we show that market making results in earning a spread that makes market making loss unlikely.