Template-Type: ReDIF-Article 1.0 Author-Name: Paulo Vitor Jordão Da Gama Silva Author-X-Name-First: Paulo Vitor Jordão Da Gama Author-X-Name-Last: Silva Author-Name: Marcelo Cabus Klotzle Author-X-Name-First: Marcelo Cabus Author-X-Name-Last: Klotzle Author-Name: Antonio Carlos Figueiredo Pinto Author-X-Name-First: Antonio Carlos Figueiredo Author-X-Name-Last: Pinto Author-Name: Leonardo Lima Gomes Author-X-Name-First: Leonardo Lima Author-X-Name-Last: Gomes Title: Volatility estimation for cryptocurrencies using Markov-switching GARCH models Abstract: In the 21st century, digital currencies have become a disruptive technology that is shaking up both financial markets and academic environment. Investors, politicians, companies, and academics are attempting to improve their understanding of these currencies for future investment possibilities and technological applications. This study aims to evaluate changes in different volatility states of eight digital currencies (BTC, ETH, LTC, XRP, XMR, NEM, LISK, and STEEM) that showed the highest liquidity and market capitalisation from 2013 to 2017. The methodology involved the MSGARCH model, using SGARCH, EGARCH, GJRGARCH, and TGARCH models. Our study demonstrated that two volatility regimes, that is, one with a larger volatility and another with a smaller one, clearly exist for all the analysed cryptocurrencies. What differs between the currencies is the probability of a second regime occurring. Moreover, we concluded that for both the first and second state, the asymmetry coefficient (gamma) is positive for all currencies. Journal: Int. J. of Financial Markets and Derivatives Pages: 1-14 Issue: 1 Volume: 7 Year: 2019 Keywords: cryptocurrencies; GARCH; Markov-switching model; volatility. File-URL: http://www.inderscience.com/link.php?id=101234 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:1:p:1-14 Template-Type: ReDIF-Article 1.0 Author-Name: Ephraim Clark Author-X-Name-First: Ephraim Author-X-Name-Last: Clark Author-Name: Sovan Mitra Author-X-Name-First: Sovan Author-X-Name-Last: Mitra Author-Name: Octave Jokung Author-X-Name-First: Octave Author-X-Name-Last: Jokung Title: Post global financial crisis modelling: credit risk for firms that are too big to fail Abstract: The global financial crisis has brought in question the validity of credit risk models. The firms that are 'too big to fail' are frequently discussed in the media, and continue to borrow rather than defaulting. In this paper we propose a new credit risk model for firms that are too big to fail. We propose a structural model of credit risk but model credit risk as a real option. We derive a closed form solution for the option to default and take into account the borrowing practices of systemically important firms. We develop our model to take into account economic factors using regime switching, and derive an option pricing solution under such a process. Finally, we obtain solutions for hedging the option to default, for markets where incompleteness exists for such options. We conduct numerical experiments to calculate the option to default at different debt values and volatility. Journal: Int. J. of Financial Markets and Derivatives Pages: 15-39 Issue: 1 Volume: 7 Year: 2019 Keywords: credit risk; real options; too big to fail; financial crisis; hedging. File-URL: http://www.inderscience.com/link.php?id=101235 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:1:p:15-39 Template-Type: ReDIF-Article 1.0 Author-Name: João Luiz Chela Author-X-Name-First: João Luiz Author-X-Name-Last: Chela Author-Name: Rodolfo Rosina Author-X-Name-First: Rodolfo Author-X-Name-Last: Rosina Title: Options pricing models of interest rate index: a comparative of pricing methodologies applied to the Brazilian market Abstract: This paper proposes to compare two options pricing models of interest rate index used in the Brazilian market and verify the best performance model. The models compared are those of Heath-Jarrow-Morton (HJM) of Brace and Musiela (1994) and Black model with expectations of the Monetary Policy Committee Meeting (Comitê de Políticas Monetárias - COPOM) of De Genaro and Avellaneda (2012) that are used by diverse investors in the financial market. For the comparison of the models we used option structures, negotiated prices and the theoretical price calculated by the Brazilian Stock Exchange (B3). After the stress test and the results of the comparisons the Alan de Genaro (ADG) model pricing - proposed by De Genaro and Avellaneda (2012) - obtained better performance than HJM model, proving to be more adequate to the reality of the Brazilian index interest rates options. Journal: Int. J. of Financial Markets and Derivatives Pages: 40-53 Issue: 1 Volume: 7 Year: 2019 Keywords: interest rate derivatives. File-URL: http://www.inderscience.com/link.php?id=101236 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:1:p:40-53 Template-Type: ReDIF-Article 1.0 Author-Name: Mohamed Bilel Triki Author-X-Name-First: Mohamed Bilel Author-X-Name-Last: Triki Author-Name: Samir Maktouf Author-X-Name-First: Samir Author-X-Name-Last: Maktouf Title: Concentration measures in emerging banking Abstract: In this study, we investigate the sensitivity of different concentration measures, such as classical index concentration and spatial index concentration, to varying regimes for Zipf's exponent (&prop;) for the Pareto-type distribution of bank sizes. We establish relationships between each concentration measure and Zipf's exponent by introducing the Riemann zeta function and calculating the elasticity for each index. We prove that the spatial concentration index is the most robust for varying regimes. Therefore, the choice of an appropriate concentration index must be carefully considered before drawing inferences about the relationship between concentration and banking fragility. Journal: Int. J. of Financial Markets and Derivatives Pages: 54-67 Issue: 1 Volume: 7 Year: 2019 Keywords: emerging banking; classical index concentration; spatial index concentration; Zipf's law. File-URL: http://www.inderscience.com/link.php?id=101237 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:1:p:54-67 Template-Type: ReDIF-Article 1.0 Author-Name: Catherine Georgiou Author-X-Name-First: Catherine Author-X-Name-Last: Georgiou Author-Name: Chris Grose Author-X-Name-First: Chris Author-X-Name-Last: Grose Author-Name: Fragiskos Archontakis Author-X-Name-First: Fragiskos Author-X-Name-Last: Archontakis Title: Predictable risks and returns: further evidence from the UK stock market Abstract: This paper examines whether the most cited performance models can explain variation in the UK stock returns. The dataset includes securities of the FTSE 100 from January 2000 to December 2016. Securities are classified based on their market capitalisation and their industry. Also, valuation ratios are put to the test so as to help us retrieve evidence of predictability. Finally, the January effect is included in our analysis as indicated particularly for the UK data. The authors find that during this short time period in which a financial crisis is also evident, all performance models are equally capable of assisting us interpreting UK predictability. Secondly, lagged market's excess returns capture most of the forecasting ability in returns, while the valuation ratios employed manage to partly predict returns in this specific sample. The paper's novelty lies in the fresh evidence presented in the case of the UK returns for the most recent dataset available. Journal: Int. J. of Financial Markets and Derivatives Pages: 68-100 Issue: 1 Volume: 7 Year: 2019 Keywords: performance models; time series forecasting; predictive variables; FTSE 100; UK. File-URL: http://www.inderscience.com/link.php?id=101246 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:1:p:68-100 Template-Type: ReDIF-Article 1.0 Author-Name: Antonio Focacci Author-X-Name-First: Antonio Author-X-Name-Last: Focacci Title: Institutional investors' stocks portfolio strategies and commodity prices: a cross-correlation analysis in a financialisation context Abstract: New institutional players entered the futures markets with additional important capital inflows from 2000s onwards. Generally, labelled by the term financialisation of commodity markets, integration between traditional financial assets and futures markets raised several concerns for potential spill-over effects on commodity price levels and return volatilities. The aim of this paper is to empirically investigate the plausibility of a lead-lag relationship ignited by institutional investors portfolio management strategies. In order to pursue this goal, a cross-correlation function (<i>ccf</i>) is applied to stock exchange indexes and main international commodity spot prices. The key findings are that the overall effects of such an increased integration/participation appear quite controversial. Oil seem to support (with weak signals detected) this reaction mechanism. Substantially, not significant results are observable for industrial and agricultural commodities. Journal: Int. J. of Financial Markets and Derivatives Pages: 101-123 Issue: 2 Volume: 7 Year: 2019 Keywords: financialisation; commodity prices; cross-correlation analysis; lead-lag relationship. File-URL: http://www.inderscience.com/link.php?id=104077 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:2:p:101-123 Template-Type: ReDIF-Article 1.0 Author-Name: Zeineb Attafi Author-X-Name-First: Zeineb Author-X-Name-Last: Attafi Author-Name: Ahmed Ghorbel Author-X-Name-First: Ahmed Author-X-Name-Last: Ghorbel Author-Name: Younes Boujelbene Author-X-Name-First: Younes Author-X-Name-Last: Boujelbene Title: Measuring portfolio risk of non-energy commodity using time-varying vine copula Abstract: In literature, many empirical studies have used the vine copula to measure and analyse the risk of stock indices, energetic products or crypto currencies portfolio (e.g., Zhang et al., 2014; Shahzad et al., 2018; Boako et al., 2019). These studies used mainly the VaR and ES with different versions of vine copula. However, few works have focused on a portfolio composed of non-energy commodities. Our aim in this work is to model the dependence between non-energy commodities returns by modelling standardised residuals obtained from univariate GARCH model by different versions of time varying vine copula, to quantify risk of N-dimensional non-energy commodity portfolio by VaR and ES and to compare the predictive performance of this method with traditional and competitive traditional univariate VaR methods. Empirical results suggest that risk quantifies generated by AR-GARCH vine copula methods with student-t distribution are sufficiently accurate at both low and high confidence levels. Given these results, we recommend the application of vine copula method to understanding the non-energy commodity behaviours which are very important to investors, producers, consumers, and policy makers. Journal: Int. J. of Financial Markets and Derivatives Pages: 163-190 Issue: 2 Volume: 7 Year: 2019 Keywords: non-energy commodity; portfolio; vine copulas; value at risk; expected short-fall and risk management. File-URL: http://www.inderscience.com/link.php?id=104078 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:2:p:163-190 Template-Type: ReDIF-Article 1.0 Author-Name: Gerasimos G. Rompotis Author-X-Name-First: Gerasimos G. Author-X-Name-Last: Rompotis Title: A performance evaluation of smart beta exchange traded funds Abstract: The focus of this paper is on smart beta ETFs, which promise enhanced returns to investors. The ability of smart beta ETFs to beat the market and offer material excess returns is investigated along with the impact on performance by various market factors such as size, value and profitability. The relation of returns, pricing discrepancy and volatility is assessed too. Moreover, the ability of ETFs to time the market is evaluated along with their efficiency in replicating the performance of their benchmarks. Finally, a market trend analysis examines how smart beta ETFs respond to the upswings and downfalls of the stock market. Results reveal that smart beta ETFs cannot outperform the market. Moreover, the influence of market factors on ETF performance is modest whereas performance is significantly related to contemporaneous and lagged premiums and intraday volatility. On the timing skills of ETF managers, the results show that they luck in such skills. In addition, the tracking error of ETFs is significant. Finally, the market trend analysis indicates that smart beta ETFs are not absolutely aligned with the overall stock market, that is, to a significant degree, ETFs move contrary to the ascending or descending paths of the market. Journal: Int. J. of Financial Markets and Derivatives Pages: 124-162 Issue: 2 Volume: 7 Year: 2019 Keywords: smart beta; exchange traded funds; ETFs; performance; factor investing. File-URL: http://www.inderscience.com/link.php?id=104079 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:2:p:124-162 Template-Type: ReDIF-Article 1.0 Author-Name: Athanasios Tsagkanos Author-X-Name-First: Athanasios Author-X-Name-Last: Tsagkanos Author-Name: George Golfis Author-X-Name-First: George Author-X-Name-Last: Golfis Author-Name: Konstantina Pendaraki Author-X-Name-First: Konstantina Author-X-Name-Last: Pendaraki Title: Destabilising the financial system via banking channel Abstract: This paper aims to investigate the effects of banking channel in destabilisation of the financial system. We make an effort to reconcile certain conflicting findings of prior literature. To this end, we focus on the involvement of management on bank earnings volatility through the quality of bank financial statements. We use data from commercial banks of three countries of Euro-zone that adopted a different approach regarding their growth model. We employ panel data analysis for a period which begins on 2001 and ends on 2014. Our key findings point to that in Greece the banking channel deteriorates the financial conditions through the bad quality of bank financial statements. However, the other countries which share similar banking size with Greece enjoy an entirely different effect by their banking channel. We perform the robustness analysis using the bootstrap standard deviation. Journal: Int. J. of Financial Markets and Derivatives Pages: 191-202 Issue: 2 Volume: 7 Year: 2019 Keywords: bank financial statements; destabilisation; financial crises; bank regulation. File-URL: http://www.inderscience.com/link.php?id=104081 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:7:y:2019:i:2:p:191-202