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Author : Ji Yeol Jimmy Oh
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (89 download)
Download or read book Essays on Modelling Financial Markets with Ambiguity and Liquidity Constraints written by Ji Yeol Jimmy Oh and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Adem Dugalic
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Essays in Financial Economics written by Adem Dugalic and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation explores effects of trading frictions due to the over-the-counter nature of some financial markets on asset prices, trading activity, market structure and efficiency. The first chapter analyses how the introduction of post-trade transparency affected dealers' trading and market liquidity in the secondary U.S. corporate bond market. Using the TRACE dataset with a novel variable identifying different dealers in the market, I quantify dealers' centrality in the context of the trading network and estimate a differential response to the reform across dealers of different centrality. I show that the introduction of transparency reduced the estimated bid-ask spreads of peripheral dealers by about 24 basis points, while spreads of core dealers remained unaffected. The trading volume of high-yield bonds fell by 6.7% for core dealers and by an insignificant amount for peripheral dealers. There was no effect on dealers' capital commitment and inventory behavior. To rationalize these findings, I propose a dynamic model of trade with asymmetric information and search frictions that gives rise to endogenous heterogeneity in dealers' trading activity and explains the empirical evidence. Three mechanisms through which transparency may affect the market are outlined: marketwise reduction in adverse selection, higher demand for immediacy by informed traders, and interaction between liquidity and informed traders. Further effects of transparency and welfare implications in the context of the model are discussed. The second chapter is co-authored with Diego Torres Patino. We study how short sale constraints on the lending side of the market affect asset prices in an equilibrium model with multiple assets. We endow investors with heterogeneous beliefs in order to generate short selling demand. We obtain a CAPM-like equation that links asset-specific excess returns with the market equity premium. In the presence of short sale constraints in the market, the model gives rise to asset-specific alphas that are explained by both asset-specific and market-wide short sale constraints; unconstrained stocks have higher risk-adjusted expected returns relative to the market portfolio, whereas the opposite holds for constrained stocks. In the absence of short sale constraints, the model reduces to the standard CAPM. We test the model using extensive data on short interest and borrow fees. The model is able to empirically explain asset prices for 10 portfolios sorted by the degree to which they are short sale constrained, as opposed to the CAPM and factor models which produce unexplained alphas that are significantly different from zero for the portfolios consisting of highly constrained stocks. In the final chapter, I study financial intermediation in a model of entry and competition between an over-the-counter market and exchange. The over-the-counter market is characterized by search, bargaining and capacity to intermediate trade of securities customized to individual investors. The exchange can support trading of a subset of standardized securities at prices quoted to all investors. I compute explicitly asset prices and volume at each trading venue and analyze efficiency of the resulting market structure. Bargaining power of investors in the OTC market and cost associated with trading non-customized securities at the exchange have ambiguous effects on the relative volume across the trading venues. The market outcome is inefficient due to bargaining in the OTC market and imperfect competition of specialist at the exchange. The model is well suited for quantitative analysis provided sufficiently detailed trading data from both types of trading venues.
Author : Jördis Hengelbrock
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (642 download)
Download or read book Essays on Liquidity in Financial Markets written by Jördis Hengelbrock and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Zeynep Senyuz
Publisher :
ISBN 13 :
Total Pages : 250 pages
Book Rating : 4.3/5 (121 download)
Download or read book Essays on Nonlinear Modeling of Real and Financial Markets with Applications to U.S. and International Data written by Zeynep Senyuz and published by . This book was released on 2008 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Yoonjung Lee
Publisher :
ISBN 13 :
Total Pages : 192 pages
Book Rating : 4.:/5 (89 download)
Download or read book Two Essays on Modeling Financial Markets as Complex and Interactive Systems written by Yoonjung Lee and published by . This book was released on 2004 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Martin Oehmke
Publisher :
ISBN 13 : 9780549968290
Total Pages : 268 pages
Book Rating : 4.9/5 (682 download)
Download or read book Essays on Financial Markets with Liquidity Frictions written by Martin Oehmke and published by . This book was released on 2009 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third chapter, joint work with Markus Brunnermeier, examines predatory short selling of equity in financial institutions. We show that when the stock of a leverage-constrained financial institution is shorted aggressively, this can trigger liquidations of long-term investments at fire-sale prices. Predatory short selling can emerge in equilibrium when a financial institution is (i) close to its leverage constraint (the vulnerability region) or (ii) violates its leverage constraint even in the absence of short selling (the constrained region). The model provides a potential justification for temporary restrictions on short selling for vulnerable institutions.
Author : Zhou Xi
Publisher :
ISBN 13 : 9781303712326
Total Pages : 170 pages
Book Rating : 4.7/5 (123 download)
Download or read book Essays on Forecasting Financial Markets Using Decomposition, Constraints and Extreme Learning Machines written by Zhou Xi and published by . This book was released on 2013 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 and 2 discuss how to use a decomposition model to make a density forecast of the financial return and how to improve this density forecast by imposing matching moment constraints. The density forecast model is based on a decomposition of financial returns into the absolute return and the sign of the return. We also use the maximum entropy principle for the out-of-sample density forecast subject to the constraint that matches the mean forecasts from the decomposition model and a simple regression model. In Chapter 1 (joint with Professor Tea-Hwy Lee), We show that when the mean forecast from the decomposition model deviates from that of the mean return, imposing the matching mean forecast constraint will tilt the density forecast of the decomposition model and improve over the density forecast of the original decomposition model. In Chapter 2 (joint with Professor Tae-Hwy Lee and Ru Zhang), we further improve the decomposition model by using dependent copula functions, and we show that the risk forecast produced by the decomposition density forecast model is superior to RiskMetrics in terms of giving higher coverage probability and lower predictive quanitle loss in extreme events of large loss for monthly returns.
Author : Fredj Jawadi
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (135 download)
Download or read book Special Issue: Essays in Modelling Financial Market Dynamics written by Fredj Jawadi and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Manuel Lobato Osorio
Publisher :
ISBN 13 :
Total Pages : 268 pages
Book Rating : 4.:/5 (498 download)
Download or read book Essays on Liquidity Constraints and Stock Price Behavior written by Manuel Lobato Osorio and published by . This book was released on 2001 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Radu-Dragomir Manac
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (17 download)
Download or read book Essays in Liquidity and Financial Markets written by Radu-Dragomir Manac and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Mahmut Ilerisoy
Publisher :
ISBN 13 :
Total Pages : 116 pages
Book Rating : 4.:/5 (93 download)
Download or read book Essays on Liquidity Risk, Credit Market Contagion, and Corporate Cash Holdings written by Mahmut Ilerisoy and published by . This book was released on 2015 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt: Furthermore, during periods with tightening credit spreads and positive liquidity shocks, the results indicate that a prime broker index and a bank index are important channels contributing to co-movement in credit spreads. This suggests that financial intermediaries play an important role in spreading market rallies across credit markets. The third chapter investigates the link between investors' ambiguity aversion and precautionary corporate cash holdings. Investors' ambiguity aversion is measured by the proportion of individual investors in a firm's investor base who are hypothesized to be more ambiguity averse compared to institutional investors. We show that the value of cash holdings is negatively associated with the extent of ambiguity aversion in a firm's shareholder base for firms that are financially constrained. Our results also show that financially constrained firms with a higher proportion of ambiguity averse investors hold less cash. These results provide support for models in which ambiguity averse investors dislike the cash holdings of firms, that are held for precautionary reasons to fund long term projects, given that the returns on long term projects are ambiguous.
Author : Anastasija Tetereva
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (15 download)
Download or read book Essays on Multivariate Modelling of Financial Markets Using Copula and Sentiment Networks written by Anastasija Tetereva and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Multivariate dependence structures play an important role in finance. The modelling and accurate prediction of multivariate financial time series is an important component of asset pricing and portfolio management. This doctoral thesis comprises three essays that address the question of multivariate dependencies using high-frequency data and innovative sources of information such as news analytics. These essays make complementary contributions to the field of financial econometrics and can be read independently of each other. The first essay focuses on the improvement of Value at Risk prediction based on highfrequency data. The novel concept of the realized hierarchical Archimedean copula is introduced. It is proposed estimating the structure and the parameters of the hierarchical Archimedean copula using the realized correlation matrix only. This approach allows one to estimate the multivariate distribution of daily returns based on intraday information. Moreover, the proposed estimator does not suffer from the curse of dimensionality. In this essay, the realized hierarchical Archimedean copula is applied to manage the risk of high-dimensional portfolios. The evidence of the superior forecasting power of our approach, compared to a set of existing models, is provided. The second essay investigates the role of news sentiment data in improving forecasts in financial econometrics. The objective of this paper is to answer the question regarding whether the class of stock-price-relevant news is wider than firm-specific announcements. For this purpose, causal links between news sentiments and excess returns are studied by means of an adaptive lasso. It is concluded that unexpected returns in the whole economy can be explained by news originating from the financial and energy sectors. In other words, the news spillover effects are dominating the direct effects of sectoral news. Therefore, including exogenous financial or energy sentim.
Author : Susan Marie deVay Flaherty
Publisher :
ISBN 13 :
Total Pages : 142 pages
Book Rating : 4.:/5 (254 download)
Download or read book Essays on Financial Market Liquidity Under Market Duress written by Susan Marie deVay Flaherty and published by . This book was released on 2003 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Bixi Jian
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Essays in Risk Modeling, Asset Pricing and Network Measurement in Finance written by Bixi Jian and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "Modelling financial interconnections and forecasting extreme losses are crucial for risk management in financial markets. This thesis studies multivariate risk spillovers at the high-dimensional market network level, as well as univariate extreme risk modelling at the asset level. The first chapter proposes a novel time series econometric method to measure high-dimensional directed and weighted market network structures. Direct and spillover effects at different horizons, between nodes and between groups, are measured in a unified framework. Using a similar network measurement framework, the second chapter investigates the relationship between stock illiquidity spillovers and the cross-section of expected returns. I find that central industries in illiquidity transmission networks earn higher average stock returns (around 4% per year) than other industries.The third chapter proposes a new Dynamic Stable GARCH model, which involves the use of stable distribution with time-dependent tail parameters to model and forecast tail risks in an extremely high volatility environment. We can differentiate extreme risks from normal market fluctuations with this model." --
Author : Fabricius Somogyi
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (135 download)
Download or read book Essays on Frictional Financial Markets written by Fabricius Somogyi and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays that uncover the origins of market frictions and their implications for the functioning of the global foreign exchange (FX) market. The first research paper speaks to the hegemony of the US dollar in FX trading. Over 85% of all FX transactions involve the US dollar, despite the United States accounting for less than one quarter of global economic activity. I show both theoretically and empirically that the US dollar dominates FX volumes because FX market participants are strategic about their trading costs. Hence, they avoid directly transacting in non-dollar currency pairs if the expected trading cost is too large. Instead, market participants exchange non-dollar pairs indirectly by using the US dollar as a vehicle currency. That is, market participants first exchange a non-dollar currency into US dollars, and then trade those US dollars for their target currency. I derive a set of theoretical conditions for currency dominance in FX trading volume. To validate these conditions empirically, I use a granular and globally representative FX trade data set. My empirical findings are consistent with the predictions of my theoretical framework and corroborate the importance of strategic behaviour as a novel determinant of currency dominance. Using a novel identification strategy, I show that up to 36-40% of the daily volume in the most liquid dollar currency pairs are due to vehicle currency trading. The second paper studies the information content of trades in the FX market. Specifically, we analyse a novel, comprehensive order flow data set, distinguishing among different groups of market participants and covering a large cross-section of currency pairs. We find compelling evidence that global FX order flows convey superior information heterogeneously across agents, time, and currency pairs. These findings are consistent with theories of asymmetric information and over-the-counter market fragmentation. A trading strategy based on exposure to asymmetric information risk generates high returns even after accounting for risk, transaction cost, and other common risk factors shown in the FX literature. Finally, the third paper analyses the cross-sectional asset pricing implications of liquidity risk in the FX market. Precisely because of its sheer size and despite its decentralised nature, the FX market is commonly known as one of the most liquid and resilient trading venues. However, a clear understanding of whether FX liquidity matters for asset prices is still missing. This paper aims to fill this gap by providing the first systematic study of the pricing implications of FX liquidity risk. We show that, even in this market, exposure to liquidity risk commands a non-trivial risk premium of up to 4% percent per annum. In particular, systematic (marketwide) and idiosyncratic liquidity risk are not subsumed by existing FX risk factors and successfully price the cross-section of currency returns. However, we also find that liquidity and carry trade premia are significantly correlated. The carry trade is a simple trading strategy that aims to profit from the interest rate differential between high- and low-yielding currencies. The correlation between liquidity and carry trade premia lends support to a liquidity-based explanation of the infamous carry trade risk premium. To illustrate this point, we decompose carry trade returns and show that the commonality with liquidity risk stems from periods of high market stress and is confined to the static but not the dynamic carry trade.
Author : Marcus Scheffer
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (958 download)
Download or read book Essays on Univariate and Multivariate Modeling of Financial Market Risks written by Marcus Scheffer and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Trung Thanh Le
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (829 download)
Download or read book Essays on Multivariate Volatility Models written by Trung Thanh Le and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis is an empirical study of how multivariate models can be applied to analyze the dependence between emerging financial markets and the US financial market. This thesis comprises of 3 complete papers which will use this data set as follows. The first paper is an comparative research on estimations and evaluations of 54 individual volatility models which belong to 10 different model classes being the Riskmetrics models, the Constant model (CCC), the Orthogonal-GARCH model (O-GARCH), the Dynamic Conditional Correlation model (DCC), the Asymmetric DCC model (ADCC), the Consistent DCC model (CDCC) and the Student's t-DCC model (TDCC). All of these models were estimated and then ranked by using both in-sample and out of sample performances. This research is to emphasize the importance of model selection in modeling the volatility of financial time series from emerging financial markets. The second paper uses the TDCC model which performed relatively well among the 54 volatility of financial time series from emerging financial markets. The second paper uses the TDCC model which performed relatively well among the 54 volatility models to analyze the volatilities and correlations of the emerging markets. Specifically, the pair-wise conditional correlations between each of the emerging markets and the US market, generated by the TDCC model, were used to perform empirical tests for the contagion of the 3 recent financial crises which are the Dotcom crisis in 2000, the Sub-prime in 2007-2008 and the Global financial crisis in 2008-2009. The use of the TDCC model which assumes a Student's t-distribution is greatly meaningful for the empirical tests for contagion as it deals with the fat-tailed behaviours of the financial data. The third paper is the application of multivariate copula, which provides a connection between the univariate distributions and the multivariate distribution inside the DCC model, to analyze the emerging data. The flexibility of the copula model that separates the multivariate distribution assumption from those univariate series allows us to have an efficient examination of the dependence structure of emerging financial markets. Following success of the copula models in recent studies, our research, which is the first to use the copula model to analyze high-dimensional data, confirms a significant improvement of the copula from the standard DCC model.
