Financial System Research Articles

Analysis of fractional Black-Scholes, Ornstein-Uhlenbeck, and Langevin models: a minimum distance estimation approach

The present research investigates parameter estimation in fractional stochastic models, specifically the Fractional Black-Scholes, Fractional Ornstein-Uhlenbeck, and Fractional Langevin models. These models, driven by fractional Brownian motion (fBm), capture long-memory effects and complex dependencies often observed in financial and physical systems. To efficiently estimate the parameters of these models, we apply the Minimum Distance Estimation (MDE) method. This approach tackles the challenges posed by long-range dependence, ensuring both asymptotic consistency and normality. We analyze the asymptotic properties of the estimators, including their consistency, asymptotic normality, and efficiency. By providing a unified theoretical framework, the current research highlights the robustness and applicability of the MDE method for parameter inference in fractional models. The findings contribute significantly to diverse fields such as quantitative finance, econometrics, and statistical physics.

Analysis of Problems and Countermeasures in China's Stock Market

As an important part of the global financial system, China's stock market has unique characteristics and challenges, such as high market volatility, information asymmetry, policy risks, and market mechanism defects. This paper aims to analyze these major problems facing the Chinese stock market and propose practical solutions. By studying the challenges of market volatility, information asymmetry, policy risks, insufficient investor education, and imperfect legal framework, this paper proposes countermeasures to improve the stability and efficiency of China's stock market. These countermeasures include improving policy transparency, promoting institutional investor participation, strengthening investor education, improving information disclosure mechanisms, and strengthening market supervision. The results show that by implementing these measures, market volatility can be effectively reduced, information transparency can be improved, market efficiency can be enhanced, and support can be provided for the sustainable development of China's stock market. This study provides valuable insights for policymakers, investors, and scholars to promote the healthy and stable development of China's stock market.

Does a non-performing assets disposal fund help control systemic risk? Evidence from an interbank financial network in China

The COVID-19 pandemic precipitated a surge in the non-performing assets held by financial institutions, elevating systemic risk in financial networks. Therefore, developing strategies to alleviate this risk, with a focus on non-performing assets, has become a research area of interest. Supported by policies related to the Chinese insurance market, this study proposes the establishment of a non-performing assets disposal fund backed by insurance capital. This fund will invest in the non-performing assets of financial institutions with the aim of mitigating systemic risk. Using a linear threshold model, we identify an asymptotically optimal scheme for disposing of non-performing assets. Additionally, we construct a payment model integrated with non-performing assets, from which we derive an optimal payment and clearing strategy. Our research also proposes a robust set of criteria to assist regulators in determining whether to use the non-performing assets disposal fund. To demonstrate the efficacy of the fund in reducing systemic risk, we conduct simulations and analyze data from the Chinese interbank financial network. Through this rigorous analysis, we confirm the role of the fund in enhancing the stability of the financial system.

Are the Crypto Markets Shock Resilient to COVID-19? A Comparative Investigation of Trading Prices and Volumes

The emergence of crypto currency as an alternative source of currency has been dubbed as one of the greatest phenomenon of the 21st century. Over the years, crypto currencies have grossly interrupted the traditional financial system and they continue to act as a catalyst for its revolution. However, cryptocurrencies have not been free from misery and controversies. The aim of this study is to explore and investigate empirically the impact of Covid-19 pandemic on price and volume dynamics in crypto markets. The study makes use of two data samples, but these samples are analyzed separately and independently. The first sample consists of Top Five Cryptocurrencies in terms of market capitalization (Bitcoin, Ethereum, XRP, Binance coin and Litecoin) as at 7 November 2020. The second one is made up of the Bottom Five Cryptocurrencies among the top 40 cryptocurrencies (FTX Token, Huobi Token, Filecoin, Dash and Decreed) as at 7 November 2020 again. The data among the Top Five Cryptocurrencies ranges from 2014 to 2021 and the data among the Bottom Five Cryptocurrencies ranges from 2018 to 2021.. The empirical results reveal that all crypto-currencies are integrated at order 1 i.e. I (1). The empirical analysis confirms presence of strong evidence for intra-and-inter long run relationship between price and volume dynamics within the crypto market irrespective of whether it is pre-pandemic or pandemic period. More so, there is convincing evidence from the results that much of the variance among the prices and volumes of the top five cryptocurrencies is attributed to the Bitcoin price-volume dynamics. This implies that it is critical for crypto market traders, investors and portfolio managers, before making any investment decision must consider the dynamics of price and trading volumes of BITCOIN as they hugely impact the prices and volumes of other altcoins.

Cooperation strategy of government-enterprise supply chain finance based on differential game

PurposeThe government plays an important role in the financing process of small and medium enterprises (SMEs), but the current government-enterprise cooperation (GEC) mechanism cannot well solve the financing problem of SMEs. In addition, since government-enterprise cooperation is a long-term dynamic process, this study aims to explore the cooperation strategy between the government and core enterprises in supply chain finance (SCF) under the dynamic structure.Design/methodology/approachConsidering both parties have the characteristics of disappointment aversion, our research constructs a game theory model of government subsidy and the effort of the enterprise to implement SCF based on differential game and studies different game strategies in the non-cooperative game, the Stackelberg game and the cooperative game.FindingsOur findings show that the government subsidy can significantly spur the enterprise in the supply chain to implement SCF. We also find that the limitation of the government subsidy exists. In addition, the optimal strategy, the optimal benefit and the total benefit of the financing system formed by the government and the enterprise in the cooperative game are better than those in the non-cooperative game. Pareto optimality is achieved.Research limitations/implicationsThe limitations of this paper are: (1) In theory, this paper only takes the government and enterprise as game subjects without considering other participants in the supply chain. In addition, only disappointment aversion is taken into consideration while in reality the participants often exhibit multiple behavior preferences. (2) In methodology, only the numerical solution is given through the solution algorithm and all parameters are assumed to be determined as time changes for the convenience of calculation.Practical implicationsThe government can motivate enterprises in the supply chain to implement SCF by providing subsidies. However, it should be noted that excessive subsidy will make the enterprise dependent on the government and as a result, decrease the effort level to implement SCF. Thus, it is necessary for the government to keep track of the business conditions of the enterprise to make a subsidy strategy. In addition, the government can reduce the impact of disappointing aversion by making more targeted policies and taking risk management measures.Social implicationsOn one hand, it is necessary for the government to keep track of the business conditions of the enterprise to make a subsidy strategy. In addition, the government can reduce the impact of their own disappointing aversion by making more targeted policies and adopting risk management measures. On the other, it is important for the enterprise to improve the regulatory mechanism and optimize the compensation structure of decision-makers to inhibit the impact of decision-makers' disappointing aversion.Originality/valueThis study is the first to investigate the mechanism of GEC in the setting of SCF based on a differential game. Furthermore, our study provides a theoretical basis for the government and enterprises to cooperate in SCF.

Quantifying connectedness between extreme risk and investor sentiment: Evidence from interconnected multilayer networks

. This article proposes a novel interconnected network framework, including lagged and contemporaneous interconnected networks, to asses connectedness in the financial system. We apply the proposed approach to examine the lagged and contemporaneous connectedness between extreme risk and investor sentiment in Chinese financial institutions. Our results suggest the spillover effect of extreme risk to investor sentiment is more significant than the inverse direction. Notably, contemporaneous information spillovers play a key role in the connectedness between extreme risk and investor sentiment. Furthermore, we find that the inter-layer connection structure is heterogeneous in the lagged and contemporaneous interconnected networks. Finally, we discuss the drivers of inter-layer connectedness and find that the securities sector is inter-layer systemic importance. Meanwhile, investors in Ping An Bank also contribute to the interconnectedness between extreme risk and investor sentiment.

Legal and Ethical Dimensions of Islamic Microfinance in Poverty Alleviation: A Critical Analysis

According to the World Bank’s (2019) study, poverty accounts for more than 70% of the total population in Nigeria, implying that over 130 million people in the country, live in poverty. This pathetic situation is further aggravated by financial exclusion whereby low-income people are neglected away from the financial system because they are considered uneconomical to serve or too difficult to reach. According to the World Bank’s Global Findex, 1.7 billion adults globally are financially excluded, living without formal credit or savings (FINCA International, 2024). Recently, microfinance has emerged as an important instrument of poverty alleviation in the developing countries with more than 7000 micro lending institutions providing loans to more than 25 million poor individuals across the world (Dahiru and Hassan, 2008). Despite the number of microfinance banks in Nigeria with over 800 of them in the country, Microfinance banks’ contribution to Nigeria’s economy is less than 1% (National Bureau of Statistics (NBS), 2020). The question now is, where lies the problem? Through a doctrinal approach, it is observed that the system of operation and management of Microfinance banks in Nigeria has eroded their primary objective (financial inclusion). This is mainly due to the imposition of high interest rate by Microfinance Institutions, poor risk management mechanism, weak organizational structure, insufficient capital, shortage of experts, among others. With its success in some parts of Nigeria such as Al-Barakah Microfinance Bank in Lagos state, Islamic microfinance is recommended to be the real solution in achieving financial inclusion through its products that are interest-free and customer-friendly to the poor and middle-class citizens, in a bid to ensure optimum poverty alleviation in a well regulated and ethical business environment.

LANDASAN HUKUM DAN PRINSIP-PRINSIP ASURANSI SYARIAH DI INDONESIA

Sharia insurance is a type of financial institution that functions in accordance with Islamic sharia, which upholds the concept of mutual protection (takaful) and mutual assistance (ta'awun). This thinking is regulated in Indonesian laws and regulations, including DSN-MUI Fatwa No. 21/DSN-MUI/X/2001, and is based on the teachings of the Koran, hadith, ijma, and ulama fatwas. Its guiding principles include mutual protection, cooperation in virtue, and avoiding aspects of riba, gharar (uncertainty), maisir (gambling), and activities that violate sharia. Islamic insurance offers Muslims a way to fulfill their risk protection requirements in line with Islamic principles, according to this research, which combines descriptive techniques with literature review methods. Sharia insurance builds a transparent and socially responsible financial system through the application of fair principles and a strong legal basis.

The Disclosure Fog: Institutional Investors and Corporate Greenwashing

ABSTRACTCorporate environmental, social, and governance (ESG) disclosure is often a superficial signal rather than something of substance and is an easily negligible form of greenwashing. Here, we explore the relationship between corporate disclosure greenwashing and institutional investors using data from Chinese listed heavily polluting firms from 2012 to 2021. We hypothesise and discover that while institutional investors encourage firms to publish social responsibility reports, they may actually discourage the use of sustainability‐related phrases in these reports. The findings hold even after performing several endogeneity and robustness tests. We also identify three mechanisms through which institutional investors influence corporate greenwashing: corporate governance, information transparency, and corporate operations. Additionally, pressure‐sensitive institutional investors are more likely to facilitate corporate greenwashing than pressure‐insensitive and pressure‐uncertain investors. However, after the Guidance on Building Green Financial System's implementation in 2016, the positive relationship between disclosure greenwashing and institutional investors has rapidly declined. The promotional effect of institutional investor‐induced greenwashing is also lower in state‐owned enterprises. Overall, our findings not only enrich the literature on institutional investors and corporate information disclosure but also have implications for improving the green financial system.

Financial Literacy for Effective Financial Planning among Sri Lankan University Students

This study examines the impact of the financial literacy level on the effectiveness of financial planning. Survey among a sample of 100 undergraduates in Sri Lankan university system was used to gather data. Purpose of the study is to identify whether the financial literacy is playing a vital role in financial planning of university students. Financial literacy was measured by Knowledge level on financial concepts, financial risk, financial system components, investments, loans and saving products. Effectiveness of Financial planning was measured through the questions relevant to cash management, saving and investment planning and execution in debt management. Regression Analysis through E-Views has been used to major statistical analysis. Through the analysis, it was founded that financial knowledge about financial risk, financial concepts, savings, investments and loans are leading a person towards a better financial behavior and planning. However, the knowledge about financial system components is not having a significant impact on effectiveness of financial planning. Results of the research study would assist to understand the importance of financial knowledge and literacy on personal financial success which would lead towards a successful nation as well.

Dynamics of access to finance, financial development and sustainable economic development in developing economies

This paper assesses the interconnectedness between access to finance (ATF), financial development (FD) and sustainable economic development (SED). The study employed a sample of world developing economies and obtained data from the World Development Indicator Database (WDI) from 2010 to 2022. The paper incorporates the static and dynamic panel estimation models to test the proposed connection. The findings show the favourable impact of FD on SED suggesting that financial expansion across developing countries plays a crucial role in enhancing sustainable development. Additionally, a robust financial system facilitates the effective mobilization and allocation of cash towards investments in eco-friendly initiatives and infrastructure, expediting the preservation of natural resources and the protection of the environment. However, access to finance weakens the connection between FD and SED which implies that the limited access to finance in developing nations can increase the income gap, limit opportunities for entrepreneurship and wealth creation, and hinder efforts to address social inequality and alleviate poverty. Consequently, this limits the development of financial services necessary for sustainable economic growth. The findings have crucial policy implications for the financial regulators and policymakers of developing nations around the world. Such that the key to achieving long-term economic growth and bettering the lives of people in developing nations lies in removing barriers to financial inclusion and advancing inclusive financial development.

Broke and Broken: The Crises Facing Local Government in England

AbstractEnglish local government faces a perilous position owing to insufficient funding, structural issues and capacity challenges. Fourteen years of austerity have significantly reduced council budgets, while increased demand for services—particularly adult social care—has strained resources. The current funding system is regressive and fails to incentivise economic growth, and the structure of local government is not fit for purpose due to a focus on unitary authorities, which are sub‐optimal for service delivery. To address these issues, this article proposes a four‐tier system of local government, a more robust funding mechanism and electoral reforms to ensure effective governance and representation.

Cryptocurrencies in the family context: trust, information and financial stability

Background: The rapid rise of cryptocurrencies has sparked debate about their role in the financial system, particularly across generations. Objectives: This study aimed to identify and explain differences in attitudes towards cryptocurrencies between Generation Z (students) and Generation Y (their parents) in Poland, focusing on trust in the financial system, perceptions of cryptocurrency value, and visions of the future financial landscape. Methodology: A survey was conducted in June 2023 with 40 students aged 23-24 and one of their parents each (80 total participants). Respondents answered questions about their trust in traditional and crypto finance, views on cryptocurrency potential, and expectations for future financial systems. Results: Generation Z showed significantly greater openness and trust in cryptocurrencies compared to Generation Y. The younger generation was more likely to view cryptocurrencies as inflation hedges and potential components of future payment systems. Generation Y demonstrated higher trust in the current financial system and fiat currency. Conclusions: The study reveals substantial intergenerational differences in cryptocurrency perceptions, with implications for financial education, regulation, and innovation. These divergences may shape the future evolution of financial markets and monetary systems.

Diversification of Islamic financial products as a strategy to improve Algeria's financial inclusion

This study aims at elucidating how diversifying Islamic financial products can support financial inclusion in Algeria. It includes analysing key indicators of Islamic financial inclusion, assessing the significance and uses of Islamic financial products in extending access to financing, and determining the difficulties Algerian banks encounter when creating, implementing, and designing these products. The study uses an analytical approach, looking at financial inclusion indicators and evaluating how diversifying Islamic products affects increasing financial access. It also looks at the limitations and difficulties banks face when trying to meet market and customer demands while ensuring that these products comply with Sharia law. The results indicate that diversifying and developing Sharia-compliant financial products can enhance financial inclusion by attracting new segments financially excluded by the conventional financial system. Furthermore, achieving financial inclusion requires Islamic banks to prioritise economic efficiency and Sharia credibility in product development, adopt modern digital technologies, and enhance customer engagement. This approach not only strengthens competitive advantage but also boosts operational efficiency, effectiveness, and cost reduction, ultimately supporting broader financial.

Digital Transformation of Islamic Boarding School Financial System; Formulation, Implementation and Evaluation

The purpose of this study is to investigate the design, implementation and evaluation of the digitalization of the financial system at Al-Amin Prenduan Islamic boarding school in Sumenep. The data were gathered from key informants i.e. the Board of Kyais, finance officers, students, and their parents, using a qualitative descriptive approach. Secondary data came from institutional documents. The findings show that the Kyai Council was consulted during the development of the digital financial system, which took into account both payment and economic needs. The transformation included the development from the Pondok Payment Application (APIP) to the Al-Amien Financial System (AFS). Implementation involved cashless transactions via interbank transfers, facility provision in each unit, and financial restrictions on students' daily allowances. Santri’s parents also participate in monitoring through the Student Information and Administration Systems. The evaluation process includes regular meetings by the financial supervision team and field studies to enhance technological efficiency and adaptation.

Assessment of the efficiency of using financial resources at JSC Yakutsk Poultry Farm

The current state of industrial enterprises largely depends on internal and external conditions, tasks and management methods, and the state of financial resources. In the conditions of uncertainty of the economic environment, rapidly changing pricing policy, and, as a consequence, the need to diversify, enterprises are required to rationalize management finances. Being the main link in the financial system, commercial organizations participate in the formation of primary incomes of the state, strengthen macroeconomic parameters, promote employment of the population, which also has a favorable effect on the investment climate in the country. Financial management of commercial organizations is implemented through working capital management, financial diagnostics and control, etc., which should ensure the stability of enterprises in various industries and areas. The main task that contributes to the effective operation of organizations is the identification and use of reserves to increase the volume of their own financial resources (profit, formation of depreciation charges). The use of various tools that contribute to the rationalization of expenses, costs, optimization of cash flow management allows you to identify reserves for profit growth. This article examines the role of financial resources in creating a solid financial base for enterprises, which is consistent with the relevance of the chosen research topic. The purpose of the study is to validate management decisions based on the analysis of financial resources using the example of JSC Yakutsk Poultry Farm. The methodological basis of the study is based on generally accepted methods, including comparative, trend, deductive, the method of calculating profitability indicators, financial coefficients. As well as the taxonomic method and the sum of places method, which are rarely used in research practice. The information basis of the study is scientific papers, statistical data, periodicals, electronic resources, financial statements and other regulatory documents of JSC Yakutsk Poultry Farm

Evaluating climate-related financial policies’ impact on decarbonization with machine learning methods

This study examines how Climate-Related Financial Policies (CRFPs) support decarbonization and renewable energy transitions across 87 countries from 2000 to 2023. Using the Policy Sequencing Score (PSS) and a bindingness-weighted adoption indicator, it explores the relationships between CRFPs, CO2 emissions, and Renewable Energy Production (REP) across diverse economic and institutional contexts. Findings reveal significant variation in outcomes. Advanced economies and OECD countries leverage structured policies and robust institutions to achieve steady emissions reductions and REP growth, with diminishing returns at higher policy intensities. Emerging Markets and Developing Economies (EMDEs) face institutional and structural constraints but show strong responsiveness to targeted policies, particularly in Sub-Saharan Africa and South Asia, where renewable energy growth potential is notable. Regions such as Latin America and East Asia display mixed trends, reflecting unique challenges and opportunities. Binding policies prove essential for environmental outcomes, particularly in institutionalized settings, while EMDEs require capacity building and international cooperation to address barriers. This study highlights the importance of tailoring CRFPs to specific contexts, emphasizing policy sequencing, enforcement, and capacity building. By identifying global and regional variations, the findings provide actionable insights for aligning financial systems with climate goals, fostering a sustainable low-carbon transition, and addressing equity challenges.

Cryptocurrencies fall from grace: Snatched safe flight to which haven during Russia-Ukraine conflict?

The unprecedented upheaval in an economic and financial system facilitates herding behaviour and flight-to-safety (FTS) episodes from a riskier asset into a safer one. The Russia-Ukraine conflict shows that the financial market assets are still prone to external shock. In line with this, the study explores the inconclusive insights on an FTS from cryptocurrencies to US treasury securities. The paper employs dynamic conditional correlation – generalized autoregressive conditional heteroskedasticity (DCC-GARCH) to test the FTS episode for a period from February 24, 2022 to February 23, 2023. The findings hold a sizeable negative and significant volatility coefficient, particularly DCCα, which directs to support the notion of short-lived FTS from cryptocurrencies to treasury securities during the invasion period. Nevertheless, some evidence of the positive volatility effect points out the risk diversification benefits. The results also show flight-to-quality from BTC, ETH, USDT, BNB, ADA and MATIC to the US dollar index (USDX), however, for other cryptocurrencies, it acts as a diversifier. We unfolded several implications that could be interesting for a market participant looking for evidence on the behaviour of cryptocurrencies and govt. backed securities during times of market uncertainty in the future.

Does the Dollar Global Financial System Simply Intermediate Savings?

ABSTRACT The main point of this article is to debunk the idea that the global monetary and financial system simply intermediates savings across countries. A corollary of this idea is that US hegemony derives from the recycling of the savings of countries with surplus current accounts to those with deficit current accounts. This article argues that the international monetary system creates dollar-denominated assets and liabilities regardless of the current account positions of the countries in which borrowers reside. Furthermore, it is argued that the hegemony of the United States does not depend on the recycling of foreign surpluses. It enjoys a privileged position as a result of the differential in the return of its foreign investments compared to those of other countries, particularly emerging and developing countries. However, this yield differential does not depend only on liquidity, as the proponents of the money view argue, but also on the economic policies that emerging and developing countries put in place. This article argues that the international monetary system is rapidly changing. A sign of this change is the different composition of external financial assets in China’s balance of payments, with a greater share of loans to developing countries than foreign reserves.

Risk dynamic evolution model of pension financial system based on partial differential equation from the perspective of complex network

Risk dynamic evolution model of pension financial system based on partial differential equation from the perspective of complex network