Modern Financial Markets Research Articles

Research on the Influence of Financial Mathematics on Modern Financial Market

In the process of continuous reform and development of financial markets, financial theories are constantly updated and the research and development of financial mathematics becomes more and more important. This paper focuses on the impact of financial mathematics on modern financial markets. Starting from the emergence and development prospect of modern financial mathematics, the impact of financial mathematics on the development of modern financial market is comprehensively elaborated by analyzing financial mathematical theories, such as harness theory, stochastic optimal control theory and optimal stopping theory, and analyzing the application of mathematical models in financial theory. Financial mathematics not only effectively drives the innovation and iteration of financial instruments, but also has a direct role in the development of financial markets. The article focuses on the application of mathematical knowledge in several financial problems, aiming to provide reference and reference for advancing the application of mathematical knowledge in the field of finance.

The The Role of Cognitive Biases in the Fluctuation of Traditional and Modern Financial Markets

Behavioural economics is overlooked when talking about economics but it is a key part of our everyday lives. Cognitive biases are the foundation of behavioural economics and they dictate every decision we make. In this paper, I examine the role our inherent cognitive biases play in the fluctuation of traditional and cryptocurrency markets. I first lay the groundwork by establishing what behavioural economics is and explaining common biases as well as explaining what financial markets are in general. I then use the dot-com bubble as a case study to analyse the existence of these biases in a traditional market by comparing fluctuations during the dot-com bubble to the speculative bubble model. Following this, I introduce cryptocurrencies and analyse the cryptocurrency market over a time period and analyse trends to determine whether a bias exists. This is done using internet search data from Google Trends, as well as conducting a self-designed survey and a regression analysis of the resulting data. Results corroborate well with the existing literature and tentatively point to the existence of cognitive biases with regard to market fluctuations in both traditional and crypto assets. The alignment of my survey data with my research strengthens the premise that these biases not only exist but also contribute to the fluctuations of markets. 

Nove tehnologije i uloga kriptovaluta na nivou investicionog portfolija

New technologies have a significant role in modern financial markets. The application of new technologies, application and software solutions has enabled financial institutions and individual and institutional investors to use mathematical-statistical and econometric models, which are based on analysis and evaluation of investment portfolios, financial risk assessment and extrapolation, as well as predictability related to cyclical economic trends, which are directly reflected in the investment portfolio. Due to the impact of the financial crisis, and especially due to global negative economic trends caused by the COVID-19 pandemic, alternative forms of financial assets that are directly created by the application of new technologies are becoming increasingly important in the international financial market. These alternative forms of financial assets are presented as cryptocurrencies. Bitcoin is the first cryptocurrency in the global financial market, and Ethereum is the second cryptocurrency in terms of market turnover. In this regard, arises the question: "Do these two leading cryptocurrencies have a significant impact on the modern financial market, as well as on the decision of individual and institutional investors regarding a different structure of the investment portfolio?" Restructuring the investment portfolio by including cryptocurrencies, aims to achieve portfolio diversification in order to better manage market and financial risks. This paper will analyze the impact of cryptocurrencies, their volatility, turnover volume and the possibility of using them as alternative financial assets of an optimal investment portfolio.

Institutional Investors in the Green Transformation of Modern Financial Markets

A wide range of economic, social, environmental, demographic problems is characteristic of the modern world and is focused on achieving the goals of sustainable development, uniting the efforts of civil society, in which the main actors of socio-economic life are involved: political and economic elites, consumers and producers of the entire aggregate of material and intangible goods and services. The world community has come to the concept of sustainable development and the transition to a "green" economy, which combine the achievement of self-sustaining economic growth with the provision of social protection of the population and minimization of negative impact on the environment. Today, institutional investors play a system-forming role in the implementation of this triune development strategy. The purpose of the article is to identify the increasing significance of institutional investors in the “green” socially responsible transformation of the global and national financial markets in the implementation of the UN SDGs in a number of developed and developing economies. Objectives, findings and discussion of the study: consideration of the prerequisites for analyzing the role of institutional investors in achieving the UN SDGs; global investors’ certain initiatives assessment that have been proposed as a paradigm for socially responsible and infrastructure investment at the national and international level; determination the role of various green institutional investors (quasi-public sector, banks, sovereign welfare funds, with the special attention to the insurance companies’ and pension funds' role in green investments process) in the implementation of the green transformation of financial markets in some countries and regions of the world economy; identification the importance of the main investment channels of institutional investors in green infrastructure in the light of types of investment (direct, indirect mixed), kinds of investments (corporate, project, investment-target), general characteristics (description, advantages, scaling, profitability).

MODERN FINANCIAL INSTITUTIONS AND MARKETS, THEIR REGULATION IN CRISIS CONDITIONS: INTERNATIONAL EXPERIENCE AND RUSSIAN PRACTICE(Review of the Speeches of the Participants of the Thematic Conference "Banks and Financial Markets" of the Fourth Russian Economic Congress)

MODERN FINANCIAL INSTITUTIONS AND MARKETS, THEIR REGULATION IN CRISIS CONDITIONS: INTERNATIONAL EXPERIENCE AND RUSSIAN PRACTICE(Review of the Speeches of the Participants of the Thematic Conference "Banks and Financial Markets" of the Fourth Russian Economic Congress)

The Standardization of Islamic Financial Law: Lawmaking in Modern Financial Markets

Abstract The project to standardize the commercial elements of the sharia as undertaken by standard-setting bodies, such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), is a lawmaking effort that is incentivized by market forces and the interaction of municipal legal systems. This Article examines the ways in which these factors contribute to the development of private Islamic legal standards, and in doing so, contribute to an emergent legal architecture that is integrated within the global economy. Contrary to the primary role assigned in existing analyses to sharia scholars and sharia supervisory boards, the Article shows that the processes that determine the composition of Islamic financial law (IFL) highlight the starkly reduced role of jurists in developing law in accordance with the traditional methodology (usul al-fiqh). Such analyses have failed to consider the standardization effort as a lawmaking project driven by market forces, which must be realized if authentic sharia principles are to be given effect. Therefore, examination of these market-led processes and their contribution to the creation of Islamic standards is essential for understanding what standardization means in relation to the fulfillment of Islamic principles and whether a high degree of standardization is desirable. First, the Article examines the role of interpretation, which highlights the methodological challenges of the standardization project. Second, the Article investigates the AAOIFI’s standard-setting efforts, including the methods of standardization, its market- and law-driven incentives, and the status of standardization efforts including the madhahib (schools of law)’s differences of legal thought. Third, an analysis of the interaction of IFL and the law of municipal legal systems (the United Arab Emirates, England and Wales, and Malaysia) highlights the legal incentivization for developing sharia standards. Finally, an analysis of the commercial practice of IFL, particularly in retail markets, demonstrates commercial law’s trend toward standardized contractual practices. Market forces compel the use of standard-form documentation, comprising standards that reflect the commercial practice of law firms and corporations.

The Promise of Blockchain Technology for Global Securities and Derivatives Markets: The New Financial Ecosystem and the \u2018Holy Grail\u2019 of Systemic Risk Containment

Weaknesses in investor control over their investments and in warehousing systemic risk in modern Financial Market Infrastructure (FMI) are the result of a combination of market failures and of structural flaws deeply ingrained in modern financial markets. Yet the utility of complex FMI comprising long custodial chains and large global Central Counterparties (CCPs) for the operation of modern markets is not seriously disputed. The change in the technology paradigm with the introduction of DLT systems for securities and derivatives FMI can increase investor control, the efficiency of risk management and, to some extent, augment the distribution of systemic risk. It can thus create a more diverse and resilient financial ecosystem. This cross-disciplinary paper identifies a multitude of reasons that favour a paradigm shift in FMI technology. It also sketches a comprehensive blockchain-based framework for the development of permission-based platforms for derivatives clearing and settlement and the handling of liquidity shortages within DLT systems. Arguably, the impact of technological change should lead to a reduction of industry rents for the benefit of end investors and of the end users of finance (entrepreneurs and businesses) enhancing market welfare. Therefore, the use of blockchain technology in FMI can transform the structure and future direction of the financial services industry as a whole.

The Promise of Blockchain Technology for Global Securities and Derivatives Markets: The New Financial Ecosystem and the 'Holy Grail' of Systemic Risk Containment

Weaknesses in warehousing systemic risk in modern Financial Market Infrastructure (FMI) are the result of a combination of market failures and of structural flaws deeply ingrained in modern financial markets. The same applies to investor control over their investments over the custodial chain. Yet the utility of complex FMI comprising long custodial chains and large global Central Counterparties (CCPs) for the operation of modern markets seems undisputable. A shift in the technology paradigm with the introduction of DLT systems for securities and derivatives FMI, could, however, increase investor control, the efficiency of systemic risk distribution, and create a more diverse and resilient financial ecosystem. This cross-disciplinary paper explores all these claims and identifies a multitude of welfare-enhancing reasons favouring a paradigm shift in FMI technology. It also proposes a comprehensive blockchain-based framework for the development of permission-based platforms for derivatives clearing and settlement and the handling of liquidity shortages within DLT systems. Arguably, the impact of technological change will lead to a reduction of industry rents for the benefit of end investors and end users of finance (entrepreneurs and businesses) enhancing market welfare. It may also signal a shift in market behaviour from short-term/speculative finance towards long-term/committed finance. Therefore, the use of blockchain technology in FMI can prove genuinely transformative for the structure and future direction of the financial services industry as whole.

Modern Financial Markets and the Complexity of Financial Innovation

Social investing will be examined as an example of modern institutional innovations with respect to the complexity of financial markets. Social impact bonds will be used as a case study of a particular innovative financial instrument in order to understand the complexity and resulting challenges of these potential market dynamics. The author argues that post-crisis regulatory regime governing US and European markets require substantial work to fully address the challenges derived from financial innovations. In particular, existing regulation, technologies, information asymmetry, agency cost, and innovation pace need to be considered in order to understand the factors which will determine likely outcomes of social impact bonds. Social Investing and the embryonic stage of current development reflect certain 'unknown areas'. This paper addresses the needs of the post-embryonic stage of the theoretical framework of financial market innovations.

Insolvency Law, Restructuring Law and Modern Financial Markets

The finance market has undergone rapid change in developed Western economies in the last decade. In much of Europe the concentrated finance market in which a small group of banks controlled the flow of finance to large and small companies has given way to a dispersed creditor economy. In both Europe and the US there has been an explosion of secured credit and the market for buying and selling debt of distressed companies has matured so that those holding the debt of a financially distressed company will, in many cases, not be the lenders who originally advanced the funds.

Complexity, Innovation and the Regulation of Modern Financial Markets

Complexity, Innovation and the Regulation of Modern Financial Markets

Complexity, Innovation and the Regulation of Modern Financial Markets

The intellectual origins of the global financial crisis (GFC) can be traced back to blind spots emanating from within conventional financial theory. These blind spots are distorted reflections of the perfect market assumptions underpinning the canonical theories of financial economics: modern portfolio theory; the Modigliani and Miller capital structure irrelevancy principle; the capital asset pricing model and, perhaps most importantly, the efficient market hypothesis. In the decades leading up to the GFC, these assumptions were transformed from empirically (con)testable propositions into the central articles of faith of the ideology of modern finance: the foundations of a widely held belief in the self-correcting nature of markets and their consequent optimality as mechanisms for the allocation of society’s resources. This ideology, in turn, exerted a profound influence on how we regulate financial markets and institutions. The GFC has exposed the folly of this market fundamentalism as a driver of public policy. It has also exposed conventional financial theory as fundamentally incomplete. Perhaps most glaringly, conventional financial theory failed to adequately account for the complexity of modern financial markets and the nature and pace of financial innovation. Utilizing three case studies drawn from the world of over-the-counter (OTC) derivatives – securitization, synthetic exchange-traded funds and collateral swaps – the objective of this paper is thus to start us down the path toward a more robust understanding of complexity, financial innovation and the regulatory challenges flowing from the interaction of these powerful market dynamics. This paper argues that while the embryonic post-crisis regulatory regimes governing OTC derivatives markets in the U.S. and Europe go some distance toward addressing the regulatory challenges stemming from complexity, they effectively disregard those generated by financial innovation.

The Operation of the Modern Financial Markets for Stocks and Bonds and its Relevance to an Islamic Economy

IntroductionThe purpose of this paper is to analyze the structure and the operation ofboth the primary and the secondary markets for stocks and bonds, includingthe use of options, warrants, and rights in the securities market of a modemeconomy, such as the United States, with a view to ascertain which of thesesecurities might be permissible to invest in under an IsIamic economic system.Section I starts with a brief description of the nature and operation of theprimary and the secondary markets for securities. It then describes the natureand scope of each type of security in terms of risks and returns to the issuerand the investor. Section II starts with an interpretation of the Islamic injunctionswith respect to trade and investment. It then proceeds to examine theextent and conditions under which investment in particular securities maybe permissible under an Islamic Economic System. Section III summarizesthe results of the study and concludes with some tentative suggestions.I. INVESTING IN SECURITIESA. PRIMARY AND SECONDARY MARKElS FOR SECURZTZESThe primary market is the market where securities are first issued bycorporations (or joint stock companies) and/or by governments. In the UnitedStates, as well as in other countries, the issuer of the security announces throughthe news media its intention to issue the security at a future date. Such an ...