Related papers: Christmas Jump in LIBOR
The intermarket analysis, in particular the lead-lag relationship, plays an important role within financial markets. Therefore a mathematical approach to be able to find interrelations between the price development of two different…
Our internal experience of time reflects what is going in the world around us. Our body's natural rhythms get disrupted for a variety of external factors, including exposure to collective events. We collect readings of steps, sleep, and…
We discuss - in what is intended to be a pedagogical fashion - a criterion, which is a lower bound on a certain ratio, for when a stock (or a similar instrument) is not a good investment in the long term, which can happen even if the…
Methods for detecting structural changes, or change points, in time series data are widely used in many fields of science and engineering. This chapter sketches some basic methods for the analysis of structural changes in time series data.…
We review the main changes in the interbank market after the financial crisis started in August 2007. In particular, we focus on the fixed income market and we analyse the most relevant empirical evidences regarding the divergence of the…
Rapid changes in climatic conditions threaten both socioeconomic and ecological systems, as these might not be able to adapt or to migrate at the same pace as that of global warming. In particular, an increase of weather and climate…
It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained within a simple non-Gaussian one-factor description with time…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
The market weight of a stock is its capitalization (cap) divided by the total market cap. Rank these weights from top to bottom. The capital distribution curve is a plot of weights versus ranks. For the US stock market, it is linear on a…
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples…
The correlation coefficient between stocks depends on price history and includes information on hierarchical structure in financial markets. It is useful for portfolio selection and estimation of risk. I introduce the Life Time of…
I propose an approach to quantify attention to inflation in the data and show that the decrease in the volatility and persistence of U.S. inflation after the Great Inflation period was accompanied by a decline in the public's attention to…
Statistical properties of an order book and the effect they have on price dynamics were studied using the high-frequency NASDAQ Level II data. It was observed that the size distribution of marketable orders (transaction sizes) has power law…
Inflation is painful, for firms, customers, employees, and society. But careful study of periods of hyperinflation point to ways that firms can adapt. In particular, companies need to think about how to change prices regularly and cheaply,…
Once upon a time there was a classical financial world in which all the Libors were equal. Standard textbooks taught that simple relations held, such that, for example, a 6 months Libor Deposit was replicable with a 3 months Libor Deposits…
The conventional formal tool to detect effects of the financial persistence is in terms of the Hurst exponent. A typical corresponding result is that its value comes out close to 0.5, as characteristic for geometric Brownian motion, with at…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
It is empirically established that order flow in the financial markets is positively auto-correlated and can serve as an example of a social system with long-range memory. Nevertheless, widely used long-range memory estimators give varying…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
The maximum likelihood state for a simplified stochastic thermohaline circulation model is investigated. It is shown that a jump occurs for the maximum likelihood state during transitions between two metastable states. The jump helps to…