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Derivatives Markets (derivative + market)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting71%
Humanities and Social Sciences28%

Selected Abstracts

Anthropologist as Prognosticator: Gillian Tett and the Credit Derivatives Market

AMERICAN ANTHROPOLOGIST, Issue 1 2010
Michael G. Powell
No abstract is available for this article. [source]

Measuring Pricing Inefficiencies Under Stressful Market Conditions

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 3-4 2003
Louis Cheng
This study examines the mispricing and time between arbitrage trades of the Hong Kong Hang Seng index futures and index options contracts under various stressed market conditions. Ex-ante trading profits and differences in time between trades across up and down as well as stressed and non-stressed markets are used to measure how well the derivative markets perform under emotional distress. We find evidence of illiquidity in stressed and down markets. In stressful markets and down markets, liquidity suppliers are less likely to trade against the informed traders. This, in turn, leads to longer time between trades and higher arbitrage profits. [source]

A model of price discovery and market design: Theory and empirical evidence

THE JOURNAL OF FUTURES MARKETS, Issue 12 2004
Michael T. ChngArticle first published online: 11 OCT 200
Price discovery is an essential function performed by derivative markets. For a derivative exchange, its markets' ability to incorporate information into prices to "derive" the underlying asset's value is a key objective of market design. The J. Hasbrouck (1991a) model is applied to examine the design and price discovery of a futures market. First, the model is extended to consider a comprehensive dynamic interaction between the price-size coordinates of orders and trades. Second, floor and screen tick data from LIFFE's FTSE 100 index futures market is used to estimate the two models. The significance of order size variables in the extended model suggests that order flow transparency, which is supported by an electronic trading platform, improves price discovery. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:1107,1146, 2004 [source]

Property Derivatives for Managing European Real-Estate Risk

EUROPEAN FINANCIAL MANAGEMENT, Issue 1 2010
Frank J. Fabozzi
G15; G20 Abstract Although property markets represent a large proportion of total wealth in developed countries, the real-estate derivatives markets are still lagging behind in volume of trading and liquidity. Over the last few years there has been increased activity in developing derivative instruments that can be utilised by asset managers. In this paper, we discuss the problems encountered when using property derivatives for managing European real-estate risk. We also consider a special class of structured interest rate swaps that have embedded real-estate risk and propose a more efficient way to tailor these swaps. [source]

PRICING EQUITY DERIVATIVES SUBJECT TO BANKRUPTCY

MATHEMATICAL FINANCE, Issue 2 2006
Vadim Linetsky
We solve in closed form a parsimonious extension of the Black,Scholes,Merton model with bankruptcy where the hazard rate of bankruptcy is a negative power of the stock price. Combining a scale change and a measure change, the model dynamics is reduced to a linear stochastic differential equation whose solution is a diffusion process that plays a central role in the pricing of Asian options. The solution is in the form of a spectral expansion associated with the diffusion infinitesimal generator. The latter is closely related to the Schrödinger operator with Morse potential. Pricing formulas for both corporate bonds and stock options are obtained in closed form. Term credit spreads on corporate bonds and implied volatility skews of stock options are closely linked in this model, with parameters of the hazard rate specification controlling both the shape of the term structure of credit spreads and the slope of the implied volatility skew. Our analytical formulas are easy to implement and should prove useful to researchers and practitioners in corporate debt and equity derivatives markets. [source]

Unspanned Stochastic Volatility: Evidence from Hedging Interest Rate Derivatives

THE JOURNAL OF FINANCE, Issue 1 2006
HAITAO LI
ABSTRACT Most existing dynamic term structure models assume that interest rate derivatives are redundant securities and can be perfectly hedged using solely bonds. We find that the quadratic term structure models have serious difficulties in hedging caps and cap straddles, even though they capture bond yields well. Furthermore, at-the-money straddle hedging errors are highly correlated with cap-implied volatilities and can explain a large fraction of hedging errors of all caps and straddles across moneyness and maturities. Our results strongly suggest the existence of systematic unspanned factors related to stochastic volatility in interest rate derivatives markets. [source]

Privatised Keynesianism: An Unacknowledged Policy Regime

BRITISH JOURNAL OF POLITICS & INTERNATIONAL RELATIONS, Issue 3 2009
Colin Crouch
There have now been two successive policy regimes since the Second World War that have temporarily succeeded in reconciling the uncertainties and instabilities of a capitalist economy with democracy's need for stability for people's lives and capitalism's own need for confident mass consumers. The first of these was the system of public demand management generally known as Keynesianism. The second was not, as has often been thought, a neo-liberal turn to pure markets, but a system of markets alongside extensive housing and other debt among low- and medium-income people linked to unregulated derivatives markets. It was a form of privatised Keynesianism. This combination reconciled capitalism's problem, but in a way that eventually proved unsustainable. After its collapse there is debate over what will succeed it. Most likely is an attempt to re-create it on a basis of corporate social responsibility. [source]