Essays On The Transmission Of Risk And Volatility Across International Financial Markets
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Essays On The Transmission Of Risk And Volatility Across International Financial Markets
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Author : Evan Warshaw
language : en
Publisher:
Release Date : 2018
Essays On The Transmission Of Risk And Volatility Across International Financial Markets written by Evan Warshaw and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
Essays On The Economic Relevance Of Volatility Spillovers
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Author : Katja Ida Maria Gisler
language : en
Publisher:
Release Date : 2016
Essays On The Economic Relevance Of Volatility Spillovers written by Katja Ida Maria Gisler and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
The first chapter focuses on the relevance of covariances in the transmission mechanism of variance spillovers across the US stock, US bond and gold markets. For that purpose, we perform a comparative spillover analysis between a model that considers covariances and a model that considers only variances. Our results emphasise the importance of covariances in the transmission mechanism. Including covariances leads to an overall increase of the spillover level and detects the beginnings of the financial crisis and of the US debt-ceiling crisis earlier than the spillover measure that considers only variances. The second chapter evaluates the role of the United States as a source of important spillover information in forecasting realised volatility for a large cross-section of international equity markets. For this purpose, we extend the heterogeneous autoregressive (HAR) model of realised volatility of Corsi (2009) by including US equity volatility information. More precisely, we augment the standard HAR model by US realised volatility and VIX HAR components, and compare it to the original HAR model across 17 international equity markets. Our in-sample and out-of-sample findings show that the US equity market volatility information is statistically significant and sizeable economically across all equity markets that we consider. The last chapter introduces a new system-wide network-based risk factor into the empirical asset pricing literature and examines its pricing ability for carry trade returns in currency markets. I find that system-wide volatility connectedness risk carries a significant and negative risk premium. That is, I show that low interest rate currencies are positively related to system-wide volatility connectedness risk, while high interest rate currencies display a negative correlation. Low interest rate currencies thus serve as a hedge during unexpectedly high system-wide volatility connectedness episodes, typical.
Essays On Volatility And Risk In Financial Markets
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Author : Kwanho Kim
language : en
Publisher:
Release Date : 1993
Essays On Volatility And Risk In Financial Markets written by Kwanho Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Euro-dollar market categories.
Essays On Economic Uncertainty And Macro Finance
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Author : Yang Liu
language : en
Publisher:
Release Date : 2017
Essays On Economic Uncertainty And Macro Finance written by Yang Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
This dissertation studies topics in macro-finance with a focus on economic uncertainty. The first chapter (Government Debt and Risk Premia) studies the implications of government debt for asset prices. I document a set of new facts that government debt is related to risk premia in various asset markets.First, the debt-to-GDP ratio positively predicts excess stock returns. The forecast power is compelling, and it outperforms many popular predictors. Second, higher debt-to-GDP ratio is correlated with higher credit risk premia in both corporate bond excess returns and yield spreads. Third, higher debt-to-GDP ratio is associated with lower real risk-free rate. Fourth, higher debt-to-GDP ratio predicts lower average returns on government debt. Expected return variation contributes to a sizable amount of the volatility of the debt-to-GDP ratio. Fifth, debt-to-GDP ratio positively comoves with fiscal policy uncertainty. Fiscal uncertainty also has direct effects on the asset prices consistent with the effect of debt-to-GDP ratio. I rationalize these empirical findings in a general equilibrium model featuring recursive preferences, endogenous growth, and time-varying fiscal uncertainty. In the model, the tax risk premium is sizable and its time variation is driven by fiscal uncertainty. Furthermore, the model generates an endogenous positive relationship between the debt-to-GDP ratio and fiscal uncertainty: fiscal uncertainty increases debt valuation through discount rate channel whereas higher debt conversely raises uncertainty in future fiscal consolidations. In the second chapter (Volatility Risk Pass-Through), we estimate and explain the international transmission of output volatility shocks to both currencies and international quantity dynamics. We produce novel empirical evidence on the relevance of output volatility (vol) shocks for both currency and international quantity dynamics. Focusing on G-17 countries, we document several facts: (1) consumption and output vols are imperfectly correlated within countries; (2) across countries, consumption vol is more correlated than output vol; (3) the pass-through of relative output vol shocks onto relative consumption vol is moderate, especially if the uncertainty shocks originate from small countries; and (4) consumption differentials vol and exchange rate vol are disconnected, in contrast to the perfect correlation implied by a model of perfect risk-sharing with time-additive preferences. We rationalize these findings in a frictionless model with multiple goods and recursive preferences featuring a novel-and-rich risk-sharing of vol shocks. The third chapter (Volatility, Intermediaries, and Exchange Rates) studies how financial market volatility drives exchange rates through the risk management practice of financial intermediaries. We build a model in which the major participants in the international financial market are levered intermediaries subject to Value-at-Risk constraints. Higher portfolio volatility translates into tighter funding conditions and increased marginal value of wealth. Thus, foreign currency is expected to appreciate. Our model can resolve the Backus-Smith puzzle, the forward premium puzzle, and the exchange rate volatility puzzle quantitatively. Our empirical test verifies two implications of the model that both financial market volatility and funding condition measurement have predictive power on exchange rates.
Volatility
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Author : Robert A. Schwartz
language : en
Publisher: Springer Science & Business Media
Release Date : 2010-11-18
Volatility written by Robert A. Schwartz and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-11-18 with Business & Economics categories.
Volatility is very much with us in today's equity markets. Day-to-day price swings are often large and intra-day volatility elevated, especially at market openings and closings. What explains this? What does this say about the quality of our markets? Can short-period volatility be controlled by better market design and a more effective use of electronic technology? Featuring insights from an international array of prominent academics, financial markets experts, policymakers and journalists, the book addresses these and other questions concerning this timely topic. In so doing, we seek deeper knowledge of the dynamic process of price formation, and of the market structure and regulatory environment within which our markets function. The Zicklin School of Business Financial Markets Series presents the insights emerging from a sequence of conferences hosted by the Zicklin School at Baruch College for industry professionals, regulators, and scholars. Much more than historical documents, the transcripts from the conferences are edited for clarity, perspective and context; material and comments from subsequent interviews with the panelists and speakers are integrated for a complete thematic presentation. Each book is focused on a well delineated topic, but all deliver broader insights into the quality and efficiency of the U.S. equity markets and the dynamic forces changing them.
Financial Contagion
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Author : Rob Quail
language : en
Publisher: John Wiley & Sons
Release Date : 2011-02-09
Financial Contagion written by Rob Quail and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-02-09 with Business & Economics categories.
"Financial Contagion: The Viral Threat to the Wealth of Nations covers a lot of territory. It is, of course, terribly important to analyze case histories to discover potential triggers, mechanisms of transmission, and viable ways to contain the damage of financial contagion. The problem is, as these articles amply demonstrate, that there’s always a new virus or a mutation of a former one lurking in some corner of the financial world. We don’t know what it is or where it is. And, even if we had some inkling, there’s almost never enough time to develop a financial flu shot." --SeekingAlpha.com The latest insights on financial contagion and how both nations and investors can effectively deal with it. The domino-style structure in which the financial system exists is a perilous one. Although historically, the financial system has been able to deal with major shocks, the fact remains that our financial system is not as secure as it should be. Recent years have brought about too many examples of contagion and systemic risk. That is why Financial Contagion is such an important read. In it, the serious concerns that revolve around our fragile economic system are investigated, researched, and explained. Throughout the book, Kolb offers valuable insights on this dilemma as he compiles the history of financial contagion, highlights the latest research on systemic failure and interrelated markets, and analyzes the risks and consequences we face moving forward. Examines the importance of careful regulation and what must be done to stabilize the global financial system Includes contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Details how close we are to witnessing a financial contagion that could devastate the world economy We have been harshly reminded of how fragile our economic ecosystem is. With Financial Contagion, you'll hold a better understanding of what needs to be done to strengthen our system and safeguard our financial future.
Globalization And Systemic Risk
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Author : Douglas D Evanoff
language : en
Publisher: World Scientific
Release Date : 2009-01-05
Globalization And Systemic Risk written by Douglas D Evanoff and has been published by World Scientific this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-01-05 with Business & Economics categories.
The impact of globalization of financial markets is a highly debated topic, particularly in recent months when the issue of globalization and contagion of financial distress has become a focus of intense policy debate. The papers in this volume provide an up-to-date overview of the key issues in this debate. While most of the contributions were prepared after the initial outbreak of the current global turmoil and financial crisis, they identify the relative strengths of the risk diversification and risk transmission processes and examine the empirical evidence to date. The book considers the relative roles of banks, nonbank financial institutions and capital markets in both risk diversification and risk transmission. It then evaluates the current status of crisis resolution in a global context, and speculates where to go from here in terms of understanding, resolution, prevention and public policy.
Volatility In Financial Markets
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Author :
language : en
Publisher:
Release Date : 2015
Volatility In Financial Markets written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
This dissertation focuses on volatility in financial markets, with a special concern for: (i) volatility transmission between different financial markets and asset categories and, (ii) the effect of macroeconomic announcements on the returns, volatility and correlation of stock markets. These issues are analysed taking into account the phenomenon of asymmetric volatility and incorporating the period of financial turmoil caused by the Global Financial Crisis. The study focuses the attention on the emerging markets of the region of Southeast Asia. The asymmetric behaviour of volatility refers to the empirical evidence according to which a negative return shock (unexpected drop in the value of the stock) generates an increase in volatility higher than a positive return shock (unexpected increase in the value of the stock) of the same size. In the financial literature two explanations of the asymmetric effect of news on stock return volatility have been put forward. The analysis of financial assets volatility is important to academics, policy makers, and financial market participants for several reasons. First, prediction of financial assets volatility is crucial to economic agents because it helps them make rational portfolio risk management decisions. Volatility is critically important to economic agents because it represents a measure of risk exposure in their investments. Furthermore, from a theoretical perspective, volatility occupies a central stage in pricing of derivative securities. For example, to price an option we need to know, as a risk measure, the volatility of the underlying asset from now until the option expires. Moreover, in a market risk context, it is vital to know the volatility of an asset in order to calculate the Value-at-Risk of a portfolio selection. Finally, volatility is important for the economy as a whole. Policy makers often rely on market estimates of volatility as a barometer for the vulnerability of the financial markets and the economy. Regarding the Asian markets, it is worth mentioning that in recent years, the interrelations between the US and the Asian markets have raised due to the increasing financial relations. One typical portfolio diversification strategy consists of investing in similar asset classes in multiple markets (international diversification). In order to make appropriate risk management strategies it is vital to know the characteristics of the markets of the different geographical areas and how the markets co-move. Likewise, it is very important to analyse which factors can influence the behaviour of the assets in the financial markets. Within Asian markets, this thesis distinguishes between mature and emerging countries. Japan represents the mature market and the emerging economies are divided into three groups: the Asian Tigers (tigers hereafter), the Asian Tiger Cub (cubs hereafter) economies and, finally, China. The objectives of this thesis are threefold. First, to explore volatility spillovers and the time-varying behaviour of the correlation between the US and the Asian stock markets. Second, to analyse how the macroeconomic events in the US affect the Asian stock market returns, volatility and correlation. Finally, to investigate volatility spillovers between equity and currency markets in Asia. Throughout these analyses, this dissertation aims to establish behaviour patterns depending on the level of development of the emerging country analysed. Furthermore, the sample period used in the analyses incorporates the period of the recent financial turmoil originated by the subprime mortgage market in the United States in the summer of 2007, with the aim of studying the effect of the Global Financial crisis on the patterns found. In general, the results of the three analyses of this dissertation show some interesting visions. While the volatility transmission pattern between the US and the Asian stock markets is mostly observed when the degree of development of the Asian country is higher, the effect of US macroeconomic news releases on these Asian markets is greater as the Asian market analysed is less developed. It is worth mentioning that China arises as a general exception of the three analyses, performing in an independent way with respect to the other Asian economies analysed. The reason of this behaviour can be due, on the one hand, to the fact that in the past decades China has been reaching market-based financial system and has been trying to open it up towards the international financial markets. In spite of these efforts, its financial market is still not entirely open to other countries worldwide. All in all, the results suggest that emerging Asian financial markets have thus far suffered only limited impact from the Global Financial crisis. However, heightened risk perception and declining investor confidence could trigger a sudden reversal of financial flows from these region's capital markets, pushing down asset prices and intensifying financial market volatility. The results of this dissertation may be useful for analysts, traders and portfolio managers. In an asset allocation framework, it is crucial to diversify the assets of a portfolio to diminish its risk. Considering international diversification, before composing a portfolio, it is very useful to know volatility spillovers across countries and asset classes. In this regard, it is vital to take into account the role of the currency market, not only because of the effect of exchange rate in foreign investments, but also for the relationship between the stocks in which to invest and the exchange rate of the related country. Likewise, macroeconomic news releases play a significant role in the stocks markets, hence it is very important to know the effect of the arrival of macroeconomic announcements on the returns, volatility and correlations of the stocks markets in which we want to invest. Finally, it is remarkable that the results of this thesis suggest that exchange rate policies should not be implemented without considering the repercussions on the stock market, and vice versa.
Three Essays In International Macroeconomics And Finance
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Author : Bada Han
language : en
Publisher:
Release Date : 2021
Three Essays In International Macroeconomics And Finance written by Bada Han and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
In this dissertation, I study the changes in external liabilities and assets of emerging market economies since the early-2000s and the following implications of the changes for the financial stability and the optimal policies of the economies. In chapter 1, I construct a dataset, which measures the external liability composition of emerging market economies in different instruments and currencies. The new dataset shows emerging market economies have much lower currency exposures than in the past. Also, the observed pattern in the dataset suggests that the ever-increasing local currency external borrowings of the emerging market economies since the early 2000s, original sin dissipation, is related to the capital market development in emerging market economies. Chapter 2 is a study of channels through which risk-appetite shocks to global investors, i.e., global financial shocks, are transmitted to emerging market economies. First, I empirically show that much of the transmission of global financial shocks to emerging market economies is reflected in equity and local currency bond portfolio investment capital flows. I then develop a small open economy model which, augmented with leverage constrained banks and foreign investors who purchase equities and bonds, can replicate these empirical findings qualitatively. Quantitative analysis of the model suggests that global financial shocks can account for 50 % of the equity price volatility and 30 % of the investment volatility in Korea, in which most of the external liabilities of the country are Korean won-denominated equities and debts. In short, all the analysis in chapter 2 implies that to a substantial extent, risk-appetite shocks to global investors are transmitted to emerging market economies via fickle portfolio capital flows to equity and local currency bond markets in the economies. In chapter 3, Dongwook Kim and I provide a novel theory of international reserve accumulation of emerging market economies. We view reserve accumulation as capital outflows by the public sector which supplements insufficient capital outflows by the private sector. In our model, when an emerging market economy receives large capital inflows in the form of direct or equity portfolio investment, the emerging market economy must invest abroad to maintain macroeconomic balance and prepare for a possible future sudden stop. If the private sector in the emerging market economy cannot invest externally sufficiently or invests inefficiently due to low financial expertise or poor institutional quality, supplemental international investments must be accomplished by the public sector as international reserve outflows.
Volatility In Financial Markets
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Author : Natàlia Valls Ruiz
language : en
Publisher:
Release Date : 2014
Volatility In Financial Markets written by Natàlia Valls Ruiz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
"This dissertation focuses on volatility in financial markets, with a special concern for: (i) volatility transmission between different financial markets and asset categories and, (ii) the effect of macroeconomic announcements on the returns, volatility and correlation of stock markets. These issues are analysed taking into account the phenomenon of asymmetric volatility and incorporating the period of financial turmoil caused by the Global Financial Crisis. The study focuses the attention on the emerging markets of the region of Southeast Asia. The asymmetric behaviour of volatility refers to the empirical evidence according to which a negative return shock (unexpected drop in the value of the stock) generates an increase in volatility higher than a positive return shock (unexpected increase in the value of the stock) of the same size. In the financial literature two explanations of the asymmetric effect of news on stock return volatility have been put forward. The analysis of financial assets volatility is important to academics, policy makers, and financial market participants for several reasons. First, prediction of financial assets volatility is crucial to economic agents because it helps them make rational portfolio risk management decisions. Volatility is critically important to economic agents because it represents a measure of risk exposure in their investments. Furthermore, from a theoretical perspective, volatility occupies a central stage in pricing of derivative securities. For example, to price an option we need to know, as a risk measure, the volatility of the underlying asset from now until the option expires. Moreover, in a market risk context, it is vital to know the volatility of an asset in order to calculate the Value-at-Risk of a portfolio selection. Finally, volatility is important for the economy as a whole. Policy makers often rely on market estimates of volatility as a barometer for the vulnerability of the financial markets and the economy. Regarding the Asian markets, it is worth mentioning that in recent years, the interrelations between the US and the Asian markets have raised due to the increasing financial relations. One typical portfolio diversification strategy consists of investing in similar asset classes in multiple markets (international diversification). In order to make appropriate risk management strategies it is vital to know the characteristics of the markets of the different geographical areas and how the markets co-move. Likewise, it is very important to analyse which factors can influence the behaviour of the assets in the financial markets. Within Asian markets, this thesis distinguishes between mature and emerging countries. Japan represents the mature market and the emerging economies are divided into three groups: the Asian Tigers (tigers hereafter), the Asian Tiger Cub (cubs hereafter) economies and, finally, China. The objectives of this thesis are threefold. First, to explore volatility spillovers and the time-varying behaviour of the correlation between the US and the Asian stock markets. Second, to analyse how the macroeconomic events in the US affect the Asian stock market returns, volatility and correlation. Finally, to investigate volatility spillovers between equity and currency markets in Asia. Throughout these analyses, this dissertation aims to establish behaviour patterns depending on the level of development of the emerging country analysed. Furthermore, the sample period used in the analyses incorporates the period of the recent financial turmoil originated by the subprime mortgage market in the United States in the summer of 2007, with the aim of studying the effect of the Global Financial crisis on the patterns found. In general, the results of the three analyses of this dissertation show some interesting visions. While the volatility transmission pattern between the US and the Asian stock markets is mostly observed when the degree of development of the Asian country is higher, the effect of US macroeconomic news releases on these Asian markets is greater as the Asian market analysed is less developed. It is worth mentioning that China arises as a general exception of the three analyses, performing in an independent way with respect to the other Asian economies analysed. The reason of this behaviour can be due, on the one hand, to the fact that in the past decades China has been reaching market-based financial system and has been trying to open it up towards the international financial markets. In spite of these efforts, its financial market is still not entirely open to other countries worldwide. All in all, the results suggest that emerging Asian financial markets have thus far suffered only limited impact from the Global Financial crisis. However, heightened risk perception and declining investor confidence could trigger a sudden reversal of financial flows from these region's capital markets, pushing down asset prices and intensifying financial market volatility. The results of this dissertation may be useful for analysts, traders and portfolio managers. In an asset allocation framework, it is crucial to diversify the assets of a portfolio to diminish its risk. Considering international diversification, before composing a portfolio, it is very useful to know volatility spillovers across countries and asset classes. In this regard, it is vital to take into account the role of the currency market, not only because of the effect of exchange rate in foreign investments, but also for the relationship between the stocks in which to invest and the exchange rate of the related country. Likewise, macroeconomic news releases play a significant role in the stocks markets, hence it is very important to know the effect of the arrival of macroeconomic announcements on the returns, volatility and correlations of the stocks markets in which we want to invest. Finally, it is remarkable that the results of this thesis suggest that exchange rate policies should not be implemented without considering the repercussions on the stock market, and vice versa."--TDX.