Different Levels Of Volatility Research Articles

Do Exchange Rates Respond Asymmetrically to Crude Oil Market Shocks? Insights from BRICS and Pakistan

Abstract The shocks in the crude oil market are unlikely to have symmetric impacts on exchange rates, especially over various time periods. Furthermore, in low- and high-volatility regimes, exchange rates are predicted to respond differently to oil market shocks. By employing Markov-switching model and state-space model, this research empirically investigates whether oil market shocks exert asymmetric impacts on exchange rates, across the time and across different levels of volatility. In doing so, the study utilizes monthly data from January 1994-September 2017 for BRICS countries and Pakistan. The findings indicate that although oil supply shocks are mostly insignificant, oil price shocks appear statistically significant to affect the exchange rates whereas aggregate demand shocks are most volatile and are more likely to cause exchange rate fluctuations. The study concludes that various forms of oil shocks have a wide range of consequences on exchange rate determinations. Nonetheless, exchange rates’ response to oil shocks differ dramatically through low- and high-volatility states, implying that oil shocks exert a time-varying impact on exchange rates. Finally, the findings provide credence to the phenomenon of asymmetry in exchange rate responses to oil market shocks.

Comparative Analysis of Volatility Levels of 10 Stock Indices on the Indonesian Stock Exchange on 2 Economic Events Using Time Series Econometric Methods

The purpose of this study is to determine the level of volatility of the 10 Stock Indices on the IDX during COVID-19 Economic Crisis and in the Economic Recovery periods in order to understand the benefits and risks of investing in post-economic crisis The results of this study indicate that 6 of 10 stock indices have no difference in the level of volatility in the 2 events. Only 4 Stock Indices have different levels of volatility. In the post-crisis period, the volatility of the stock index is at a very low level, so it is very interesting to see the investment returns opportunities. Although in these 2 events; majority of volatility levels of stock indices are relatively low in terms of parameters; but there is a fairly large gab of volatility values. High levels of volatility can also occur not only during crisis but also when the economy has improved.

Sublimation of refractory minerals in the gas envelopes of accreting rocky planets

Protoplanets growing within the protoplanetary disk by pebble accretion acquire hydrostatic gas envelopes. Due to accretion heating, the temperature in these envelopes can become high enough to sublimate refractory minerals which are the major components of the accreted pebbles. Here we study the sublimation of different mineral species and determine whether sublimation plays a role during the growth by pebble accretion. For each snapshot in the growth process, we calculate the envelope structure and the sublimation temperature of a set of mineral species representing different levels of volatility. Sublimation lines are determined using an equilibrium scheme for the chemical reactions responsible for destruction and formation of the relevant minerals. We find that the envelope of the growing planet reaches temperatures high enough to sublimate all considered mineral species when M ≳ 0.4 M⊕. The sublimation lines are located within the gravitationally bound envelope of the planet. We make a detailed analysis of the sublimation of FeS at around 720 K, beyond which the mineral is attacked by H2 to form gaseous H2S and solid Fe. We calculate the sulfur concentration in the planet under the assumption that all sulfur released as H2S is lost from the planet by diffusion back to the protoplanetary disk. Our calculated values are in good agreement with the slightly depleted sulfur abundance of Mars, while the model over predicts the extensive sulfur depletion of Earth by a factor of approximately 2. We show that a collision with a sulfur-rich body akin to Mars in the moon-forming giant impact lifts the Earth’s sulfur abundance to approximately 10% of the solar value for all impactor masses above 0.05 Earth masses.

An efficient production planning approach based demand driven MRP under resource constraints

Production plans based on Material Requirement Planning (MRP) frequently fall short in reflecting actual customer demand and coping with demand fluctuations, mainly due to the rising complexity of the production environment and the challenge of making precise predictions. At the same time, MRP is deficient in effective adjustment strategies and has inadequate operability in plan optimization. To address material management challenges in a volatile supply-demand environment, this paper creates a make-to-stock (MTS) material production planning model that is based on customer demand and the demand-driven production planning and control framework. The objective of the model is to optimize material planning output under resource constraints (capacity and storage space constraints) to meet the fluctuating demand of customers. To solve constrained optimization problems, the demand-driven material requirements planning (DDMRP) management concept is integrated with the grey wolf optimization (GWO) algorithm and proposed the DDMRP-GWO algorithm. The proposed DDMRP-GWO algorithm is used to optimize the inventory levels, shortage rates, and production line capacity utilization simultaneously. To validate the effectiveness of the proposed approach, two sets of customer demand data with different levels of volatility are used in experiments. The results demonstrate that the DDMRP-GWO algorithm can optimize the production capacity allocation of different types of parts under the resource constraints, enhance the material supply level, reduce the shortage rate, and maintain a stable production process.

Economic recovery and inflation risk: what is the “price” to manage debt?

It is clear the action of policy makers aimed at supporting the economic recovery, holding up consumption in the short term as well as public investments in the long terms. Furthermore, policy makers exploit a favorable monetary policy as long as inflation allows it. This effect can be surely considered a current and future issue that impacts on the levels of government debt, the sustainability and the new Fed overshooting strategy for inflation (AIT) which makes flexible the optimal 2% target. In terms of portfolio management, these effects are very negative considering both the exposure to government debt and the impact on the credit and equity assets. High levels of inflation are certainly useful in order to manage the debt in real terms, but it could turn to be a risk for portfolio management. This study aims to show how these risks linked with inflation can impact on the value of the different types of investment portfolios characterized by different levels of volatility, different asset classes and equity/corporate factor exposures. Through the application of a composite scenario on several variables, ad-hoc stress tests and scenarios, the article shows the key-role of an ex-ante risk management participation for a proper asset-allocation.

Making room for sub-Saharan Africa: Forbivalence and the assets and liabilities of foreignness

Sub-Saharan African states have underdeveloped economic infrastructures and recognize their need for and thus welcome foreign expertise, investment, and resources. However, at the same time a history of colonization increases each state’s national identity and gives them reason to be less welcoming to foreign status and direction. When considered in an organization context, this ambivalence towards foreignness – or what we term forbivalence – has implications for firm performance, and thus makes important the fundamental firm characteristics of foreignness and domesticity. Yet, scant studies address these factors in such a context, particularly how they interact with different levels of volatility, nationalism, and resource need, all contextually important moderating influences. Considering economical, historical and limited resource implications from a unique context, our study conceptualizes the relationship between firm foreignness and firm performance across sub-Saharan African nations. In addition, we extend understanding of the liabilities and assets of foreignness and emphasize the importance of understanding the context. The model provides new insights about the implications of forbivalence and firm foreignness within the sub-Saharan African context.

Delta Hedging of Derivatives using Deep Reinforcement Learning

Building on previous work of Kolm and Ritter (2019) and Cao et al. (2019), this paper explores the novel application of Deep Reinforcement Learning for Delta Hedging of options in an utility based framework where an agent is faced with a trade-off between hedging error and transaction costs while aiming at maximizing the expected profit and loss and minimizing its variance. In the presence of transaction costs we compare the performance of two state-of-the-art Reinforcement Learning algorithms with two simple benchmark strategies widely used in practice. We perform the analysis on synthetic data for different market characteristics, transaction costs, option maturities and hedging frequencies, and find that the agents deliver a strong performance in markets characterized by stochastic volatility and jumps in asset prices, as well as for high transaction costs, high hedging frequency and for options with long maturities. Furthermore, we apply trained algorithms to similar (but not seen before) options and present a way of improving the robustness of the algorithms to different levels of volatility. Finally, we transfer the hedging strategies learned on simulated data to empirical option data on the S&P500 index, and demonstrate that transfer learning is successful: hedge costs encountered by reinforced learning decrease by as much as 30% compared to the Black- Scholes hedging strategy. Our results indicate that the hedging strategies based on Reinforcement Learning outperform the benchmark strategies and are suitable for traders taking real-life hedging decisions, even when the networks are trained on synthetic (but versatile) data.

Alternation of parties in power and economic volatility: testing the rational partisan hypothesis and policy learning hypothesis

Right and left parties have distinct macroeconomic preferences that could create different levels of volatility during their executive tenures. But rational partisan theory argues that, because actors in the economy anticipate ruling party behavior, partisan differences only matter when election outcomes are uncertain. We argue that policy risk from ruling parties extends beyond elections, leading to important variation in growth volatility that occurs during a ruling party’s tenure. Building on theories of policy risk and learning, we argue that after elections, economic actors still face uncertainty about the policies of new ruling parties. With time in power, new ruling parties build policy track records, reducing policy risk and, thus, volatility. We estimate a learning curve model of ruling party duration’s effect on the variation in quarterly GDP growth rates. Using data from 44 democracies between 1981 and 2009, we find that learning processes extend beyond the conclusion of uncertain elections.

An empirical Bayes' procedure for ranking players in Ryder Cup golf

We describe a model to obtain strengths and rankings of players appearing in golf's Ryder Cup. Obtaining rankings is complicated because of two reasons. First, competitors do not compete on an equal number of occasions, with some competitors appearing too infrequently for their ranking to be estimated with any degree of certainty, and second, different competitors experience different levels of volatility in results. Our approach is to assume the competitor strengths are drawn from some common distribution. For small numbers of competitors, as is the case here, we fit the model using Monte-Carlo integration. Results suggest there is very little difference between the top performing players, though Scotland's Colin Montgomerie is estimated as the strongest Ryder Cup player.

Heterogeneous price dynamics in U.S. regional electricity markets

The U.S. electricity wholesale market is organized in several deregulated regional markets. This paper compares price dynamics of electricity in the U.S. wholesale markets and shows that electricity prices from the West and East coasts have different regime dynamics. Our methodology suggests that electricity prices are better parameterized by four regimes with different levels of volatility. Additionally, West and East coast markets differ in the time spent in each regime. The extremely high volatility regime describes West coast prices during the California electricity crisis, but East coast prices are also frequent in that regime. We find evidence of synchronization of price dynamics in the mean-reverting and highest volatility regimes, i.e., prices from the East and West coasts tend to be in the same regimes at the same time.

Heterogeneity of the determinants of euro-area sovereign bond spreads; what does it tell us about financial stability?

In this paper, we assess the movements of euro area sovereign bond yield spreads vis-à-vis the German Bund as processes specified across different levels of volatility and subject to movements in asset prices and economic conditions. The determinants we use are grouped into domestic and euro-area aggregates, thus allowing us to derive results on their relative explanatory power and compare them across time and the spectrum of countries. We find that volatility influences the deterministic processes of the euro area sovereign spreads and that identical determinants have effects on spreads that vary considerably across countries. Furthermore, we find that variables reflecting investment confidence conditions and perceptions for the upcoming economic activity are significant determinants and their significance remains, to a large extent, even when controlling for fiscal variables.

Heterogeneity of the determinants of Euro-area sovereign bond spreads: what does it tell us about financial stability?

In this paper we assess the movements of euro area sovereign bond yield spreads vis-a-vis the German Bund as processes specified across different levels of volatility and subject to movements in asset prices and economic conditions. The determinants we use are grouped into domestic and euro-area aggregates, thus allowing us to derive results on their relative explanatory power for movements in spreads and compare them across time and the spectrum of countries. We find that volatility influences the deterministic processes of the euro area sovereign spreads and that identical determinants have effects on spreads that vary considerably across countries. Furthermore, we find that economic sentiment indices are the most important determinants and their significance remains, to a large extent, even when controlling for the debt-to-GDP ratio.

Post-Announcement Return Volatility And Takeover Outcomes: Evidence Of Differential Information Arrival

<span>This paper focuses on the effects of information arrival on asset return volatility. Rather than examine aggregate patterns in daily variances, this paper exploits the information rich circumstances of merger and tender offer bids to generate hypotheses of varying information arrival, and tests those hypotheses. The results reveal that differing bid circumstances, such as the presence of competing bids, do generate different levels of volatility, and these difference are consistent with the hypothesized information arrival differences.</span>

Trading With A Day Job: Can Automated Trading Strategies Be Profitable?

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">The focus of the research is the profitability of using automated trading strategies. In other words, can trading strategies that are automatically executed in financial markets be profitable? In this study, three strategies are traded in a simulated environment under two different types of market conditions and on two different underlying assets. The trading strategies are based on a moving average crossover system with 5, 10, and 20 day moving averages. The first strategy uses only this moving average crossover system. The second strategy uses this same moving average system requiring increasing volume confirmation to make a trade. The final strategy uses this moving average crossover system but requires confirmation by a relative strength index to make a trade. The two market conditions used are an upward trending market and a consolidating market. The assets traded are the NASDQ 100 (i.e., QQQQ) and the S&P Deposit Receipts Trust (SPY). These assets tend to have different levels of volatility over time.</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;"> </span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic;"><span style="font-family: Times New Roman;">The automated trading strategies are simulated using historical data and the trading software TradeStation. TradeStation allows for trading strategies to be implemented and tested on historic data at various time intervals and using a variety of time charts. A number of numeric values are also calculated by TradeStation including the number of trades and the profit or loss produced by these trades. The simulation results indicated that for both assets in markets that trend upwards, the moving average strategy with confirmation by the relative strength index dominated the other two strategies in terms of profits. During consolidating market periods, the simulation results are less clear. The magnitude of the profits when trading the relatively stable S&P varied across the three strategies and various time charts. However for the more volatile NASDQ 100, profits tended to be greater for the simple moving average strategy than the other two strategies.</span></span></p>

GLANCING METEOR SHOWER OVER INDONESIA: VOLATILITY SPILLOVERS FROM A MAJOR STOCK MARKET TO INDONESIAN STOCK MARKET AND CURRENCY

During the deepest financial crisis in mid 2007-2009, increasing volatility of Indonesian stock market index were captured. Increasing volatility of the series is a common event since the volatility of financial market around the globe is increasing likewise. Yet, whether it is a sign of volatility spillover or comovement still emerges as a mystery. This paper seeks to explain the causes of the increasing volatility in domestic currency and stock market. To investigates the hypothesis in tranquil and crisis periods, the observation period of January 2, 2003 to May 31, 2010 is splitted into two sub-periods with different levels of volatility. Using VAR-EGARCH on daily stock market index of Indonesia (IDX), S&P 500, and the bilateral exchange rate, we documented the existence of meteor shower and heatwaves in Indonesia stock market and exchange rate during crisis period. This finding implies that in crisis period, Indonesian stock market and exchange rate volatility were not only affected by market specific factors, but were also affected by volatility of the major stock market. We also captured asymmetric affects in the model which suggests that negative shock in the major stock market will increase the volatility of domestic stock market more than positive shock will. Keywords: volatility spillovers, comovement, contagion, VAR-EGARCH

Reward value and prediction error in human medial frontal cortex: a model-based fMRI study

Event Abstract Back to Event Reward value and prediction error in human medial frontal cortex: a model-based fMRI study Massimo Silvetti1*, Ruth Seurinck1 and Tom Verguts1 1 Ghent University, Belgium The anterior cingulate cortex (ACC) has been shown to be critically involved in reinforcement learning, uncertainty computation, and volatility estimation, revealing a central role of this area in decision-making. Single cell recordings in the ACC revealed neural populations coding for reward expectations and the difference between such expectations and the real environmental outcomes (prediction error). In humans, influencing fMRI findings suggested that the activity of this region could mainly driven by volatility estimation. The connection between the microscopic level of neurophysiological data and the macroscopic level of human fMRI paradigms of reward-based decision-making remains still unclear. Here we propose a biologically plausible neural model of ACC, the Reward Value and Prediction Model (RVPM), based exclusively on data from single-cell recordings, and computing reward expectations and prediction errors. Computer simulations revealed that the prediction errors-related activity of our model could account for both effects of uncertainty and volatility observed in fMRI paradigms, and predicted that high uncertain environments should activate the ACC more than volatile environments. In a further step, we tested this prediction by a model-based fMRI study, in which we administered to a group of healthy volunteers a task with monetary rewards in environments with different levels of volatility and uncertainty. We then fitted the resulting BOLD signal with the signal obtained by the RVPM, and the results suggested that human ACC shows a profile of activation closely matching the one predicted by our model, indicating that this area responses mainly to uncertainty rather than to volatility. Keywords: decision-making, fMRI Conference: XI International Conference on Cognitive Neuroscience (ICON XI), Palma, Mallorca, Spain, 25 Sep - 29 Sep, 2011. Presentation Type: Poster Presentation Topic: Poster Sessions: Decision Making, Reward Processing & Response Selection Citation: Silvetti M, Seurinck R and Verguts T (2011). Reward value and prediction error in human medial frontal cortex: a model-based fMRI study. Conference Abstract: XI International Conference on Cognitive Neuroscience (ICON XI). doi: 10.3389/conf.fnhum.2011.207.00379 Copyright: The abstracts in this collection have not been subject to any Frontiers peer review or checks, and are not endorsed by Frontiers. They are made available through the Frontiers publishing platform as a service to conference organizers and presenters. The copyright in the individual abstracts is owned by the author of each abstract or his/her employer unless otherwise stated. Each abstract, as well as the collection of abstracts, are published under a Creative Commons CC-BY 4.0 (attribution) licence (https://creativecommons.org/licenses/by/4.0/) and may thus be reproduced, translated, adapted and be the subject of derivative works provided the authors and Frontiers are attributed. For Frontiers’ terms and conditions please see https://www.frontiersin.org/legal/terms-and-conditions. Received: 23 Nov 2011; Published Online: 28 Nov 2011. * Correspondence: Dr. Massimo Silvetti, Ghent University, Ghent, Belgium, massimo.silvetti@istc.cnr.it Login Required This action requires you to be registered with Frontiers and logged in. To register or login click here. Abstract Info Abstract The Authors in Frontiers Massimo Silvetti Ruth Seurinck Tom Verguts Google Massimo Silvetti Ruth Seurinck Tom Verguts Google Scholar Massimo Silvetti Ruth Seurinck Tom Verguts PubMed Massimo Silvetti Ruth Seurinck Tom Verguts Related Article in Frontiers Google Scholar PubMed Abstract Close Back to top Javascript is disabled. Please enable Javascript in your browser settings in order to see all the content on this page.