Nancial Market Research Articles

Model-free superhedging duality

In a model free discrete time nancial market, we prove the superhedging duality theorem, where trading is allowed with dynamic and semi-static strategies. We also show that the initial cost of the cheapest portfolio that dominates a contingent claim on every possible path ! 2 , might be strictly greater than the upper bound of the no-arbitrage prices. We therefore characterize the subset of trajectories on which this duality gap disappears and prove that it is an analytic set.

Статистическое изучение конъюнктуры валютного рынка

The authors attempted to conduct a statistical study of foreign exchange market and its environment, determined the theoretical basis of the study and aspects of practical application of the obtained results. To achieve this goal, the authors defined the subject of the statistical study of the foreign exchange market environment, structured scorecard to assess the state of the foreign exchange market, indicated the sources of information for the statistical analysis of the foreign exchange market environment in various areas. In the process of writing the article, the authors also used relevant materials on the topic of the research developed and published by the authorized organizations, including the international ones. In the study of the currency market and its situation in various areas the authors identified its importance for the financial stability of the national economy, the relationship with other segments of the fi nancial market, and the impact on macroeconomic indicators of economic development. Special attention was paid to the system of indicators to characterize the currency market environment, which is the methodological basis of the study and analysis of phenomena and processes occurring in the foreign exchange market. The authors compiled and structured a system of statistical indicators for the analysis of the status and development of the currency market in various areas in accordance with the available sources of information. This article discusses the issues related to deriving statistical data about the currency market from offi cial and alternative sources, the assessment of the completeness and reliability of statistical information was conducted, directions to improve statistical monitoring of the foreign exchange segment of the fi nancial market were determined. In the article, considerable attention is paid to the methodology of calculating separate indicators, including derivatives, in accordance with national and international statistical standards. In the study the authors came to the conclusion that currently, primary foreign exchange statistical information is suffi cient for calculating the recommended indicators characterizing the foreign exchange market environment, including supply and demand, and their correlation. In addition, the Bank of Russia has enough statistics to study the current situation with the sources of currency supply and demand in a relatively longer term. The indicators of the currencies turnover, its detailed structure, currency exchange rates, their fluctuations, and the business activity indicators are calculated fully or have the necessary reliable information for their assessment.

A Heterogeneous Agent Model of Asset Price with Three Time Delays

This paper considers a continuous-time heterogeneous agent model of a ...nancial market with one risky asset, two types of agents (i.e., the fundamentalists and the chartists), and three time delays. The chartist demand is determined through a nonlinear function of the di¤erence be- tween the current price and a weighted moving average of the delayed prices whereas the fundamentalist demand is governed by the di¤erence between the current price and the fundamental value. The asset price dy- namics is described by a nonlinear delay di¤erential equation. Two main results are analytically and numerically shown: (i) the delay destabilizes the market price and generates cyclic oscillations around the equilibrium; (ii) under multiple delays, stability loss and gain repeatedly occurs as a length of the delay increases.

FINANCIAL TRANSACTION TAXATION IN AGENT-BASED SIMULATION

The aim of this paper is to investigate the impact of fi nancial transaction taxes (FTTs) on the stability of fi nancial markets. This paper presents an agent-based fi nancial market model and simulations in which agents follow technical and fundamental trading rules to determine their speculative investment positions. The model developed by Westerhoff (2009) was chosen for implementation and was extended by FTT and arising transaction costs. Because FTTs may be defi ned in various ways, this paper defi nes assets as tax objects. The model includes direct interactions between speculators, which may lead them to decide to change their trading behavior and addresses a technical and a fundamental strategy of market participants. The results suggest that the modifi ed model has a tendency to stabilize itself in the long term if fundamental trading rules outweigh the technical trading method. This model could be used when bubbles and crashes occur in fi nancial markets. Asset prices would be stabilized because their value targets near the fundamental value and volatility would also be minimized. Setting FTTs at a low rate for market stabilization is important. If FTTs and consequent transaction costs are too high, then the fi nancial system will destabilize and prices will grow without limit. The model described in this paper explores dependence market stability to the extent of FTTs. However, the model should not be interpreted as a model only for the introduction of FTT, but as a general model of transaction costs’ infl uence on the fi nancial market.

THE PROBLEM OF REGULATING THE MARKET OF COLLECTIVE INVESTMENTS IN RUSSIA IN CONDITIONS OF FINANCIAL CRISIS

At the moment the Bank of Russia became the megaregulator of the fi nancial market of Russia that opens new opportunities and prospects for development on the one hand, with another - there is a full monopolization of control and supervision of its participants. The author of article describes actual problems of regulation of the market of collective investments, relying on the existing practice of activity of management companies. Analyzing a situation from the point of view of protection of interests of the investor, and also for development of this sector of economy he suggests to shift focus in regulation. The main attention, in his opinion, needs to be turned on involvement of the experts conducting practicians and analysts in the sphere of professional and trust management for development of optimal solutions of the existing problems of the fi nancial market, and also for creation of the transparent and healthy economic environment of his activity. Aiming efforts at the development of innovative instruments of collective investment, it is possible to make signifi cant progress in overcoming of the crisis phenomena in fi nancial sector of economy

MEASURING THE COMPLEXITY IN THE PERUVIAN FINANCIAL MARKET

Information on the complexity of a phenomenon, may be obtained by measuring their levels of libertad.Asimismo that phenomenon paths converge to an attractor set, the degrees of freedom of the system, are the degrees of freedom of atractor. In this article we study the presence of an attractor for the dynamic set in the nancial market and estimate its dimension. They will be used the ideas of reconstruction of attractors using delay coordinates Takes and applications are centered in the peruvian nancial market.

Universal arbitrage aggregator in discrete-time markets under uncertainty

In a model independent discrete time nancial market, we discuss the richness of the family of martingale measures in relation to dierent notions of Arbitrage, generated by a class S

Business Cycles with Financial Intermediation in Emerging Economies

This paper explores the quantitative role of nancial market frictions on capital ows and the business cycle in emerging markets. A nancial sector in analogy to Gertler and Karadi (2011) is embedded in an otherwise standard neoclassical model of a small open economy. An agency problem between international investors and domestic banks gives rise to an endogenously determined leverage ratio. Along with a traditional productivity shock, international investors appetite for emerging market assets is introduced as an exogenous disturbance. I nd that the amount of attractable external funds that the nancial sector can extend to the domestic economy depends on bank capital and investment behavior of foreigners. Domestic banks amplify the external funding squeeze to the real economy which leads to higher output volatility in case of nancial openness. A calibrated version of the model ts key Mexican real and nancial sector business cycle moments.

Rare Disaster Concerns Everywhere

We propose an empirical framework of disaster concerns to explain cross-sectional return variation both within and across asset classes. Using a large set of out-of-the-money options on international equity indices, foreign currencies, and global government bonds, we measure the global …nancial market’s rare disaster concerns under only no-arbitrage conditions. Assets that have low return covariations with such concerns earn high excess returns in the future. The return predictability driven by rare disaster concerns is distinct from that driven by exposures to realized disaster shocks such as macroeconomic downturns and liquidity crunches, and is not

A CONVERGENCE OF OPTIMAL INVESTMENT STRATEGIES FOR THE HARA UTILITY FUNCTIONS

Abstract. An explicit expression of the optimal investment strategy cor-responding to the HARA utility function under the constant elasticity ofvariance (CEV) model has been given by Jung and Kim [6]. In this paperwe give an explicit expression of the optimal solution for the extendedlogarithmic utility function. And we prove an a.s. convergence of theHARA solutions to the extended logarithmic one. 1. IntroductionA manager of the surplus by pension funds wants to maximize the expectedutility of the surplus V(T) of his insurance company at the maturity time Tbefore retirement of the policyholders. In the case of no investment during theperiod [0;T], we assume that the surplus process (V(t)) t2[0;T] of the companyis given by the following form:(dV(t) =  0 dtV(0) = V 0 ;(1.1)where the constant V 0 >0 is the initial surplus and the constant  0 >0 isthe continuous rate of contribution. And we assume that all of the surplus isinvested in a nancial market which consists of two securities, named BandS, whose prices are given by the following di erential equations:dB(t) = rB(t)dt (1.2)anddS(t) = S(t)dt+ kS

THE IMPACT OF THE INTEREST RATE ON THE LEVEL OF ACQUIRED CAPITAL AND INVESTMENTS BY VENTURE CAPITAL FUNDS AND PRIVATE EQUITY FUNDS ON THE POLISH MARKET

Venture capital funds and private equity funds are classified in the fi- nancial market as an alternative investment. The cycle of high-risk investment funds consists of three main successive phases. The first one is to raise funds from investors and then invest them actively. The level of invested funds col- lected and is influenced by many factors, among which the most important seems to be the degree of development of the capital market, the historical rate of return of funds and the market rate. The aim of the article is to analyze the influence of changes in the reference interest rate in the period 1998-2013 on the Polish market to the level obtained and invested funds through venture capital funds and private equity funds.

The impact of global factors on stock market movements in emerging market economies

Global factors are becoming increasingly important as a cause of international capital fl ows. It is nearly impossible for some countries to protect themselves from outside infl uences on their fi nancial markets. This paper investigates the extent to which various global factors such as stock market volatility, international liquidity and global interest rate levels impact on the effective fi nancial market exchange rates of selected emerging market economies. These results are compared with effects on the fi nancial market exchange rates of the United States, the United Kingdom and Germany.

Discrete-Time CPPI Under Transaction Cost and Regime Switching

This paper studies the performance of discrete-time constant proportional portfolio insurance (CPPI) under proportional trading cost and regime switching. Explicit formulas are developed for a variety of measures for the performance of a CPPI portfolio, and a double-sided Laplace inversion method is developed to compute the Omega measure of a CPPI portfolio. The established formulas can be easily implemented for sensitivity analysis on performance of a CPPI portfolio, and a numerical example with a real data set of S&P 500 index is presented to illustrate the eects the regime switching feature of the nancial market and the existence of transaction cost can exert on the performance of a CPPI portfolio.

A genetic algorithm for option pricing: the American put option

The search for a better option pricing model continues to nd the one that outperforms the existing ones in the nancial market. In this paper, we present a Genetic Algorithm (GA) to price a xed term American put option when the underlying asset price is Geometric Brownian Motion. The Genetic Algorithm has a better approximation of the relationship between the option price and its contract terms. Our method produces a perfect and a minimum option price that outperforms other models like the Black-Scholes under the same conditions. The method requires

Was There Informed Trading in LIBOR Referenced Interest Rate Futures?

During 2008 a series of allegations emerged is respect of systematic attempts to manipulate the London Interbank Oered Rate (LIBOR). In this paper we implement a version of the probability of informed trading measure rst introduced in Easley et al. (1996), for the Eurodollar futures market over the 1996 to 2013 period. The Eurodollar future is one of the most actively traded US Dollar LIBOR benchmarked derivatives in the world with total traded volume in excess of half a quadrillion US dollars in 2011 (Source: CFTC) and is possibly the world’s largest nancial market. The objective of this paper is an ex-post review of the eectiveness of the PIN in determining changes in the information structure of the market around documented episodes of recorded manipulation of the benchmark rate, from the various publicly available regulatory reports. In keeping with previous studies on interest rate derivatives, we nd that the average PIN is far higher than for the equity market at or around 2/3 to 3/4. When implementing a rolling measure of the PIN to detect time variation we nd a clear pattern of increases and decreases in informed trading relative to the recorded activity in the current regulatory reports. Furthermore, we also nd a strong maturity eect that appears to arise from the strong time variation in trading in these contracts over their life-cycle, from inception to maturity. We construct a series of experiments to determine the signicance of the trading time for dierent epochs from 1996 to 2014 using all inside quotes and trades in these contracts. Our results indicate that the PIN could have been used as an early warning of unusual activity in the LIBOR reference rate and anecdotally we demonstrate that on specic dates identied

An Analysis of Insider Trading in the Credit Derivatives Market Using the Event Study Methodology

Purpose: In this paper I investigate the information fl ow between the credit default swap market and the stock market as well as insider trading in the credit default swap market. Methodology: For my analysis I use the event study methodology. Using the event study methodology I calculate abnormal stock returns and abnormal credit default swap premium changes. The analysis is based on 175,874 observations collected for 92 companies between the years 2001 and 2010. Findings: The results show that the information fl ow from the credit default swap market to the stock market is the most signifi cant in terms of negative rating outlooks. The information fl ow is much less signifi cant in relation to negative surprises during announcements of annual fi nancial results and rating upgrades. Evidence of insider trading is also most evident with reference to negative rating outlooks. Additionally, a distinctive feature of the credit default swap market and the stock market is the asymmetric response to negative and positive credit information. Research limitations: The event study methodology does not consider other potentially important reasons for the information fl ow between markets than the ones actually investigated. The credit events and credit risk information used in this research are just a proposal and can be extended by future researchers. Originality: This paper discusses a new research area. The main research area in terms of insider trading is still the stock market, with special focus on the US market. I decided to explore the insider trading phenomenon in the credit default swap market. I only considered contracts that are quoted with reference to European underlying assets. This part of the fi nancial market is attractive in terms of economic research as credit derivatives are more commonly used not only in North America but also in Europe.

Optimal Macroprudential Policy

We introduce …nancial market friction through search and matching in the loan market into a standard New Keynesian model. We reveal that the second order approximation of social welfare includes the terms related to credit, such as credit market tightness, the volume of credit, and the loan separation rate, in addition to the in‡ation rate and consumption under …nancial market friction. Our analytical result justi…es why optimal policy should take credit variation into account. We introduce monetary policy and macroprudential policy measures for …nancial stability into the model. The optimal outcome is achieved through monetary and macroprudential policies by taking into account not only price stability but also …nancial stability.

Simple Model for Market Returns Distribution

It has been observed that at the large time scales the distributionof stock market returns is convergent from Boltzmann distribution to Gaussianasymptotic one. To explain this universal phenomenon, we propose a new andsimple dynamic model to describe this convergence by the time parameter inassociation with the introducing the concept of relaxation time for nancialmarkets. The analysis of stock market data packages in dierent time intervalsshowed that our model ts well the nancial market data. The meaning ofso{called relaxation time has been qualitatively made clear, as a measure toestimate the stability of the market.

MONEY NEXUS ANTARA PERKEMBANGAN FUNGSI UANG DAN DAMPAKNYA TERHADAP INFLASI DI INDONESIA

This research was discussed about the relationship between the development of the function of money fromthe stage of barter between two commodities, which are C and C’ and then become C-M-C’, when the moneyonce introduced. M - C - M’ happened when the businessman utilize the money (M) to produce commodityC, that will be sell to generate more money (M’). Last, the trading process of M - M’ that shown the capital orfi nancial market, just like the money or security market. The development of the function of money was shownby the changes of the money supply that weigh by the infl ation. Based on the data on 1990-2011 using theAnova and regression analysis, it is known that there were a difference between the currency money supply,demand deposits, and quasi money in Indonesia; The currency money supply didn’t have signifi cantly positiveeffect on the infl ation in Indonesia; The demand deposits didn’t have positive effect on the infl ation in Indonesia;and the quasi money have positive effect on the infl ation in Indonesia.Keywords: money nexus, currency money, demand deposits, quasi money, infl ation rate

Apie eksperimentinį investavimo strategijų tyrimą realiose ir virtualiose fi nansų rinkose

Darbo tikslas yra įvertinti įvairias investavimo strategijas pagal jų pelningumą realiose ir virtualiose fi nansų rinkose. Darbe aprašytas atnaujintas fi nansų rinkos modelis, analizuojami eksperimentinių skaičiavimų rezultatai. On the experimental investigation of investment strategies in the real and virtual fi nancial marketsJonas Mockus, Igor Katin, Joana Katina SummaryThe optimal fi nancial investment (Portfolio) problem was investigated by leading fi nancial organizations and scientists. The aim of these works was to defi ne the optimal diversifi cation of the assets depending on the acceptable risk level.The aim of the paper is to evaluate different investment strategies in the real and virtual fi nancial markets. This aim is the new element of the proposed simulation system since optimization is performed in the space of investment strategies; both daily and long-term. A number of different investment strategies are presented, including the ones based on the Modern Portfolio Theory (MPT).The simulated investment procedures include different prediction methods. The methods that minimize the mean absolute error (MAE) are added to the traditional ones that minimize the least squares error (MSE). The results of the virtual fi nancial market are compared with historical data.The model is designed as a tool to represent the behavior of an individual investor which wants to predict how the expected profi t depends on different investment strategies using different forecasting methods of real and virtual stocks.