Template-Type: ReDIF-Article 1.0 Author-Name: Sascha Wilkens Author-X-Name-First: Sascha Author-X-Name-Last: Wilkens Title: Computational challenges for value-at-risk and expected shortfall: Chebyshev interpolation to the rescue? Abstract: Computational challenges associated with calculating risk measures are inherent to many applications in financial institutions. An example is the need to revalue portfolios of trading positions hundreds or thousands of times to determine the future distribution of their present values and risk measures such as value-at-risk and expected shortfall. This paper reports on an exploratory study in which recently popularised 'smart grids' based on Chebyshev interpolation are compared to standard (uniform) grids as well as Taylor expansion when applied to this task. While generally outperforming other methods and despite their advantageous properties, Chebyshev grids are still subject to drawbacks such as difficult error control and the curse of dimensionality. They cannot yet be seen as a quantum leap in the calculation of risk measures. Ongoing research focussing on sparse grids and their approximation quality, however, is promising. Journal: Int. J. of Financial Markets and Derivatives Pages: 101-115 Issue: 2 Volume: 8 Year: 2021 Keywords: risk measurement; market risk; value-at-risk; VaR; expected shortfall; interpolation; Chebyshev. File-URL: http://www.inderscience.com/link.php?id=115854 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:2:p:101-115 Template-Type: ReDIF-Article 1.0 Author-Name: William Forbes Author-X-Name-First: William Author-X-Name-Last: Forbes Author-Name: George Giannopoulos Author-X-Name-First: George Author-X-Name-Last: Giannopoulos Author-Name: Len Skerratt Author-X-Name-First: Len Author-X-Name-Last: Skerratt Title: Is overreaction/underreaction chosen by managers? Evidence from Greece Abstract: This paper models overreaction/underreaction as being the outcome of company managers' choices to manipulate earnings in response to perceived mispricing of their company. One of the more prominent attempts to reconcile observed short-term overreaction and consequent secular underreaction to earnings news interprets earnings announcements as 'selective' events. In financial markets events are 'selected' when contrived in response to perceived asset mispricing. We interpret earnings management by managers as a process requiring a selection of earnings in response to perceived mispricing of their corporation's stock. Post-earnings announcement drift is then interpreted as one consequence of this form of managerial choice. We devise and test a trading strategy, implemented at the earnings announcement date, based on the level of discretionary accruals in relation to past mispricing. The profitability of such a strategy is tested and conclusions for attempts to reconcile short-term overreaction with secular underreaction are drawn. Journal: Int. J. of Financial Markets and Derivatives Pages: 116-147 Issue: 2 Volume: 8 Year: 2021 Keywords: underreaction; selective earnings; perceived mispricing; earnings announcements. File-URL: http://www.inderscience.com/link.php?id=115859 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:2:p:116-147 Template-Type: ReDIF-Article 1.0 Author-Name: Dharen Kumar Pandey Author-X-Name-First: Dharen Kumar Author-X-Name-Last: Pandey Author-Name: Vineeta Kumari Author-X-Name-First: Vineeta Author-X-Name-Last: Kumari Title: An event study on the impacts of Covid-19 on the global stock markets Abstract: With a sample of 23 developed and 26 emerging market indices using the standard event methodology (Brown and Warner, 1980, 1985), with the market model estimation, the hypotheses that 'Covid-19 cases do not impact the stock market returns' and 'Covid-19 deaths do not impact the stock market returns' have been tested. The empirical results infer that the markets have reacted differently to different events. While the market reaction differs in the case of the first Covid-19 cases detected, the market reaction is similar in the case of the first Covid-19 deaths. The events have negatively and significantly impacted the global stock markets anticipating more severity in the future. The average change in the high-lows of the global indices has been minus 33%. However, this is an initial impact, and the long-term impact will be a topic for future research. The speed of recovery would depend upon how the outbreak is controlled and what are the future policy choices made by the governments. Journal: Int. J. of Financial Markets and Derivatives Pages: 148-168 Issue: 2 Volume: 8 Year: 2021 Keywords: event study; developed markets; emerging markets; Covid-19; market model. File-URL: http://www.inderscience.com/link.php?id=115871 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:2:p:148-168 Template-Type: ReDIF-Article 1.0 Author-Name: Varuna Kharbanda Author-X-Name-First: Varuna Author-X-Name-Last: Kharbanda Author-Name: Rachna Jain Author-X-Name-First: Rachna Author-X-Name-Last: Jain Title: Impact of COVID on the stock market: a study of BRIC countries Abstract: The study examined the impact of COVID confirmed cases and deaths on BRIC countries' stock market return and volatility. The entire data was collected for the time duration from 1 June 2019 to 31 May 2020 for all the four BRIC nations. The results based on GARCH (1, 1) model revealed that stock markets were adversely affected due to COVID 19 crisis. Moreover, results suggest the negative correlation between stock market return and volatility index. The results are robust, as VAR-X model also suggests that volume of BRIC nations stock market have a negative significant impacted due to cases and deaths by COVID. The study highlights that investors are in a pessimistic mode due to COVID, which is evident from stock market results of BRIC nations. Overall, the results illustrate the changes in financial markets globally due to COVID. Journal: Int. J. of Financial Markets and Derivatives Pages: 169-184 Issue: 2 Volume: 8 Year: 2021 Keywords: stock market; COVID 19; volatility; BRIC; investors. File-URL: http://www.inderscience.com/link.php?id=115872 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:2:p:169-184 Template-Type: ReDIF-Article 1.0 Author-Name: Fabio S. Dias Author-X-Name-First: Fabio S. Author-X-Name-Last: Dias Title: Using conditional asymmetry to predict commodity futures prices Abstract: Despite decades of studies, there is still no consensus on what type of serial dependence, if any, might be present in risky asset returns. This manuscript provides an empirical study of the prices of energy commodities, gold and copper in the futures markets and demonstrates that, for these assets, the level of asymmetry of asset returns varies through time and can be forecast using past returns. A regime switching model is used to construct a managed futures trading strategy that provides returns that are statistically significant. It is also demonstrated how such model can be used to make probabilistic predictions of commodity prices in futures markets, which can be used to drive value-at-risk and potential future exposure metrics or guide dynamic hedging strategies of commodity price risk. Journal: Int. J. of Financial Markets and Derivatives Pages: 185-203 Issue: 2 Volume: 8 Year: 2021 Keywords: time series analysis; time series momentum; probabilistic forecasting; mixture models. File-URL: http://www.inderscience.com/link.php?id=115876 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:2:p:185-203 Template-Type: ReDIF-Article 1.0 Author-Name: Sudhanshu Pani Author-X-Name-First: Sudhanshu Author-X-Name-Last: Pani Title: Liquidity in high resolution in limit order markets Abstract: This paper investigates, in high resolution, the role of liquidity in a limit order market. Liquidity in these markets has two parts - a liquidity store and liquidity flow (time dimension). We model the liquidity residing in a limit order book and the liquidity flow from the latent order book, using a fully probabilistic model. Using a sample of stocks from NASDAQ 100, we find that liquidity residing in the order book within five levels each on either side of the transaction price and the flow to this liquidity pool from the latent order book can explain the wealth traded through the trading system, when observed in business time. The explanatory power is satisfactory in high resolution and short periods of business time but weaker in aggregated longer time periods. We observe that the liquidity pool for a large part of the trading day goes into a steady state equilibrium. Journal: Int. J. of Financial Markets and Derivatives Pages: 23-49 Issue: 1 Volume: 8 Year: 2021 Keywords: high resolution; liquidity; Bayesian hierarchical models; limit order markets; vine copula regression; market microstructure. File-URL: http://www.inderscience.com/link.php?id=113844 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:1:p:23-49 Template-Type: ReDIF-Article 1.0 Author-Name: Carla Gomes Costa De Souza Author-X-Name-First: Carla Gomes Costa De Author-X-Name-Last: Souza Author-Name: Fernando Antonio Lucena Aiube Author-X-Name-First: Fernando Antonio Lucena Author-X-Name-Last: Aiube Title: Transition and measurement noise correlation in affine and Gaussian models: the case of oil prices Abstract: This paper proposes a new approach for the estimation of affine and Gaussian factor models with the Kalman filter method. It considers the correlation between the innovations of transition and measurement equations. We use crude oil prices in the analysis. When applying this correlation approach in two- and three-factor models, we obtain improvements of error measures between estimated and observed future prices with inexpensive estimation procedures. Journal: Int. J. of Financial Markets and Derivatives Pages: 50-64 Issue: 1 Volume: 8 Year: 2021 Keywords: commodity factor models; Kalman filter estimation; future prices; oil prices. File-URL: http://www.inderscience.com/link.php?id=113858 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:1:p:50-64 Template-Type: ReDIF-Article 1.0 Author-Name: Nagy Bálint Zsolt Author-X-Name-First: Nagy Bálint Author-X-Name-Last: Zsolt Author-Name: Benedek Botond Author-X-Name-First: Benedek Author-X-Name-Last: Botond Title: Co-skewness, co-kurtosis and their implications on asset pricing of cryptocurrencies Abstract: This study examines several asset pricing specifications applied for a sample of 72 cryptocurrencies. We extend the existing literature on asset pricing of cryptocurrencies by including higher co-moment factors, namely co-skewness and co-kurtosis. Our overall conclusion is that co-skewness and co-kurtosis are also priced in crypto-markets, but less pronouncedly than in equity/commodity/derivatives markets. Size and momentum factors further increase explanatory power, but their regression coefficients are insignificant. Journal: Int. J. of Financial Markets and Derivatives Pages: 65-78 Issue: 1 Volume: 8 Year: 2021 Keywords: cryptocurrency; Bitcoin; altcoins; co-skewness; co-kurtosis; asset pricing; excess returns; Fama-MacBeth regressions. File-URL: http://www.inderscience.com/link.php?id=113860 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:1:p:65-78 Template-Type: ReDIF-Article 1.0 Author-Name: Rebecca Abraham Author-X-Name-First: Rebecca Author-X-Name-Last: Abraham Title: Informed trading or liquidity trading: a theoretical formulation Abstract: This paper provides theoretical formulations of informed trading contrasted with liquidity trading. Informed trading occurs when traders flock to purchase or sell securities, based upon private information. In contrast, liquidity traders purchase or sell securities for their own inventory. Informed traders purchase in large volume over very short periods of time, with a definite direction of price movement. Liquidity trading consists of unlimited market entry of traders, reducing profit per trader, along with a long time period of investment in which the direction of price movement is uncertain, diminishing gains. This paper presents optimal trade prices for informed traders prior to stock mergers, whereupon traders have been observed short selling the acquirer stock, using the proceeds to purchase target stock, or to purchase put options. A capital structure arbitrage strategy is used for liquidity traders, with the trader purchasing or selling bonds at trade prices influenced by the market maker's prices. Proceeds from this strategy may be used to purchase equities. Journal: Int. J. of Financial Markets and Derivatives Pages: 1-22 Issue: 1 Volume: 8 Year: 2021 Keywords: informed trading; intraday trading; short selling; liquidity trading. File-URL: http://www.inderscience.com/link.php?id=113866 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:1:p:1-22 Template-Type: ReDIF-Article 1.0 Author-Name: Mathias Schneid Tessmann Author-X-Name-First: Mathias Schneid Author-X-Name-Last: Tessmann Author-Name: Régis Augusto Ely Author-X-Name-First: Régis Augusto Author-X-Name-Last: Ely Author-Name: Mário Duarte Canever Author-X-Name-First: Mário Duarte Author-X-Name-Last: Canever Title: Volatility transmissions between commodity futures contracts in short, medium and long term Abstract: This article investigates the relationship between agricultural and energy commodity markets by measuring the volatility transmissions between future contracts through a spillover index that can be partitioned into different frequency bands. We use data from Chicago Mercantile Exchange and the Intercontinental Exchange of New York from March 3, 2000 to May 4, 2017, including ten different commodities. We show that volatility transmissions increased after the 2006-2008 food crisis, but has fallen after 2013. Around 74.4% of the volatility in those markets is transmitted from one to four days since the shock has occurred. Corn, wheat and soybeans are the main transmitters and receivers of volatility, while oil is significantly more important than natural gas in terms of price volatility transmissions. Journal: Int. J. of Financial Markets and Derivatives Pages: 79-99 Issue: 1 Volume: 8 Year: 2021 Keywords: volatility transmission; commodities; futures markets; energy assets; agricultural assets; corn; rice; coffee; oil; wheat; soybeans; natural gas; sugar; oats. File-URL: http://www.inderscience.com/link.php?id=113870 File-Format: text/html File-Restriction: Access to full text is restricted to subscribers. Handle: RePEc:ids:ijfmkd:v:8:y:2021:i:1:p:79-99