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on Financial Markets |
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Issue of 2007‒09‒09
ten papers chosen by |
| By: | Patarick Leoni (Economics Department, National University of Ireland, Maynooth); |
| Abstract: | We simulate the performances of a standard derivatives portfolio to evaluate the relevance of benchmarking in terms of downside risk reduction. The simulation shows that benchmarking always leads to significantly more severe losses in average than those generated by letting the portfolio reach the end of a given horizon. Moreover, switching from a 0-correlation across underlyings to a very mild form of correlation significantly increases the probability of reaching the downside benchmark before maturity, whereas adding more correlation does not significantly increase this figure. |
| Keywords: | : Derivatives; Portfolio management; Benchmarking; Downside risk; Monte-Carlo simulations. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:may:mayecw:n1760607&r=fmk |
| By: | BIAIS, Bruno; BOSSAERTS, Peter; SPATT, Chester |
| Date: | 2007–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:7370&r=fmk |
| By: | BIAIS, Bruno; DECLERCK, Fany |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:7371&r=fmk |
| By: | BIAIS, Bruno; GREEN, Richard |
| Date: | 2007–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:7373&r=fmk |
| By: | Taoufik Bouezmarni; Jeroen V.K. Rombouts (IEA, HEC Montréal) |
| Abstract: | In this paper we estimate density functions for positive multivariate data. We propose a semiparametric approach. The estimator combines gamma kernels or local linear kernels, also called boundary kernels, for the estimation of the marginal densities with semiparametric copulas to model the dependence. This semiparametric approach is robust both to the well known boundary bias problem and the curse of dimensionality problem. We derive the mean integrated squared error properties, including the rate of convergence, the uniform strong consistency and the asymptotic normality. A simulation study investigates the finite sample performance of the estimator. We find that univariate least squares cross validation, to choose the bandwidth for the estimation of the marginal densities, works well and that the estimator we propose performs very well also for data with unbounded support. Applications in the field of finance are provided. |
| Keywords: | Asymptotic properties, asymmetric kernels, boundary bias, copula, curse of dimension, least squares cross validation. |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0708&r=fmk |
| By: | Luc Bauwens; Arie Preminger; Jeroen V.K. Rombouts (IEA, HEC Montréal) |
| Abstract: | We develop a Markov-switching GARCH model (MS-GARCH) wherein the conditional mean and variance switch in time from one GARCH process to another. The switching is governed by a hidden Markov chain. We provide sufficient conditions for geometric ergodicity and existence of moments of the process. Because of path dependence, maximum likelihood estimation is not feasible. By enlarging the parameter space to include the state variables, Bayesian estimation using a Gibbs sampling algorithm is feasible. We illustrate the model on SP500 daily returns. |
| Keywords: | GARCH, Markov-switching, Bayesian inference. |
| JEL: | C11 C22 C52 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:0709&r=fmk |
| By: | Michael J. Fleming; Joshua V. Rosenberg |
| Abstract: | Using data on U.S. Treasury dealer positions from 1990 to 2006, we find evidence of a significant role for dealers in the intertemporal intermediation of new Treasury security supply. Dealers regularly take into inventory a large share of Treasury issuance so that dealer positions increase during auction weeks. These inventory increases are only partially offset in adjacent weeks and are not significantly hedged with futures. Dealers seem to be compensated for the risk associated with these inventory changes by means of price appreciation in the subsequent week. |
| Keywords: | Brokers ; Treasury bills ; Treasury bonds ; Government securities ; Asset pricing |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:299&r=fmk |
| By: | Cole, Rebel; Moshirian, Fari; Wu, Qionbing |
| Abstract: | Previous research has established (i) that a country’s financial sector influence future economic growth and (ii) that stock market index returns affect future economic growth. We extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth. Using dynamic panel techniques to analyze panel data from 18 developed and 18 emerging markets, we find a positive and significant relationship between bank stock returns and future GDP growth that is independent of the previously documented relationship between market index returns and economic growth. We also find that much of the informational content of bank stock returns is captured by country-specific and institutional characteristics, such as bank-accounting-disclosure standards, banking crises, enforcement of insider trading law and government ownership of banks. |
| Keywords: | Banks; Economic Growth; Emerging Markets; Financial Development |
| JEL: | G15 G21 O11 G14 O43 |
| Date: | 2007–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4714&r=fmk |
| By: | Ip-wing Yu (Research Department, Hong Kong Monetary Authority); Laurence Fung (Research Department, Hong Kong Monetary Authority); Chi-sang Tam (Research Department, Hong Kong Monetary Authority) |
| Abstract: | Development of the local bond markets has been a top priority for financial reforms in the region after the Asian financial crisis. Various initiatives have also been taken to foster the development of the regional bond market. This paper looks into the degree of integration of sovereign (government) bond markets in Asia. It provides a survey of indicators and measures to monitor the development, measure progress and assess the state of bond market integration in the region. Our empirical results broadly show that there is only weak bond market integration in the region and very little progress has taken place since 2003. The apparent lack of progress may be due to the "local" or "idiosyncratic" factors in some Asian economies. |
| Keywords: | Financial integration, Kalman filter, Cointegration, Synchronisation, Dynamic correlation |
| JEL: | C13 C22 F36 G15 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:hkg:wpaper:0710&r=fmk |
| By: | Tom Fong (Research Department, Hong Kong Monetary Authority); Alfred Wong (Research Department, Hong Kong Monetary Authority); Ivy Yong (External Department, Hong Kong Monetary Authority) |
| Abstract: | The presence of price disparity between A- and H- shares suggests that the two markets are segmented and thus allocation of capital is inefficient. In this paper, we attempt to identify the factors contributing to the price disparity, with a view to helping policymakers find solutions to the problem. Our results suggest that the disparity is caused by a combination of micro and macro factors. The fact that some of these factors are found to have played a crucial role in determining the disparity implies that reforms that can remove or reduce the segmentation can potentially bring considerable benefits by improving price discovery and market efficiency. |
| Keywords: | Price disparity, Chinese stock markets, Panel data analysis, Synchronisation, Dynamic correlation |
| JEL: | C23 F36 G10 G12 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:hkg:wpaper:0711&r=fmk |