Identifying the Type of Market Structures
Monopoly markets and situations where companies hold pricing power can result in inefficiencies. Nevertheless, government agencies and regulators face the difficult task of assessing market power and determining if a firm has a dominant position. This requires regulators to measure…
Oligopoly Competition
Demand Analysis under Oligopoly Competition The demand curves in oligopoly markets are influenced by the level of pricing interdependence among firms. When collusion exists in a market, the aggregate market demand curve is divided among the individual producers. In contrast,…
Monopolistic Competition
Demand Analysis under Monopolistic Competition In monopolistic competition, firms have a downward-sloping demand curve, meaning lower prices lead to more demand and vice versa. At some prices, demand is very responsive to changes (elastic), and at lower prices, demand is…
Characteristics of Market Structures
Market structure can be defined as the characteristics of a market, which can either be competitive or organizational. Moreover, market structure outlines the nature of the competition and the pricing procedure in a market. Therefore, it describes the number of…
Breakeven Analysis
Companies can be grouped as operating in perfect or imperfect competitive environments depending on the slope of the demand curve. Perfectly Competitive Environment In a perfectly competitive environment, firms are the price takers. That is, it must the market price…
Yield Spread Measures for Money Market Instruments
Money market instruments are short-term debt securities with original maturities of one year or less. They are a crucial part of the financial market and include a variety of instruments such as overnight sale and repurchase agreements (repos), bank certificates…
Yield Spread Measures for Floating-rate Instruments
Floating Rate Instruments Floating-rate instruments, such as floating-rate notes (FRNs) and most loans, differ from fixed-rate bonds in their periodic payment dynamics. Their interest payments fluctuate based on a reference interest rate, ensuring the borrower’s base rate remains aligned with…
Issuance and Trading of Government and Corporate Fixed-income Instruments
Sovereign vs. Corporate Debt Issuance Process There is a clear distinction between corporate and sovereign debt issuance processes. Corporate debt issuance tends to be opportunistic and is managed by investment bank underwriters on behalf of the issuers. On the other…
Funding Choices: Sovereign & Non-sovereign Governments, Quasi-government Entities, and Supranational Agencies
National or Sovereign Government Issuers National governments possess the sovereign authority to derive tax cash flows from economic activities within their jurisdiction. In contrast, private sector issuers depend on operating cash flows and alternative repayment sources, such as asset sales,…
Long-term Corporate Debt: Investment-grade (IG) Vs. High-yield (HY) Bonds
Corporate issuers use long-term debt to secure stable funding for a range of requirements, from short-term operations to long-term capital investments. However, the features and availability of such funding vary based on the credit quality of the issuer. While IG…
