scholarly journals Financial Network Connectedness and Systemic Risk During the COVID-19 Pandemic

2021 ◽  
Author(s):  
Mike K. P. So ◽  
Lupe S. H. Chan ◽  
Amanda M. Y. Chu
Keyword(s):  
Financial Markets ◽  
Systemic Risk ◽  
World Economy ◽  
Network Density ◽  
Portfolio Risk ◽  
Huge Number ◽  
Financial Network ◽  
Rolling Window ◽  
Causality Tests ◽  
Network Connectedness

AbstractThe COVID-19 pandemic causes a huge number of infections. The outbreak of COVID-19 has not only caused substantial healthcare impacts, but also affected the world economy and financial markets. In this paper, we study the effect of the COVID-19 pandemic on financial market connectedness and systemic risk. Specifically, we test dynamically whether the network density of pandemic networks constructed by the number of COVID-19 confirmed cases is a leading indicator of the financial network density and portfolio risk. Using rolling-window Granger-causality tests, we find strong evidence that the pandemic network density leads the financial network density and portfolio risk from February to April 2020. The findings suggest that the COVID-19 pandemic may exert significant impact on the systemic risk in financial markets.

scholarly journals High frequency multiscale relationships among major cryptocurrencies: portfolio management implications

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Walid Mensi ◽  
Mobeen Ur Rehman ◽  
Muhammad Shafiullah ◽  
Khamis Hamed Al-Yahyaee ◽  
Ahmet Sensoy
Keyword(s):  
Granger Causality ◽  
Portfolio Management ◽  
High Frequency ◽  
Long Term Memory ◽  
Portfolio Risk ◽  
Hedging Strategies ◽  
Rolling Window ◽  
Causality Tests ◽  
Granger Causality Tests

AbstractThis paper examines the high frequency multiscale relationships and nonlinear multiscale causality between Bitcoin, Ethereum, Monero, Dash, Ripple, and Litecoin. We apply nonlinear Granger causality and rolling window wavelet correlation (RWCC) to 15 min—data. Empirical RWCC results indicate mostly positive co-movements and long-term memory between the cryptocurrencies, especially between Bitcoin, Ethereum, and Monero. The nonlinear Granger causality tests reveal dual causation between most of the cryptocurrency pairs. We advance evidence to improve portfolio risk assessment, and hedging strategies.

scholarly journals Testing of Volatility Spillovers Dynamics and Network Connectedness between Islamic Indices of Regional Stock Markets

2019 ◽  
Vol IV (I) ◽  
pp. 128-137
Author(s):  
Kashif Hamid ◽  
Rana Shahid Imdad Akash ◽  
Muhammad Mudassar Ghafoor
Keyword(s):  
Financial Markets ◽  
Stock Markets ◽  
The Political ◽  
Volatility Spillovers ◽  
Transmission Process ◽  
Stock Indices ◽  
Rolling Window ◽  
Shock Transmission ◽  
Network Connectedness ◽  
Over Time

Volatility spillovers and market network connectedness is the most recent phenomena which prevails among the financial markets. The purpose of this research is to evaluate the volatility spillovers and connectedness among Islamic Stock indices of global (MSCI) and Islamic indices of the regional stock markets i.e., DJMI, FTSE, JKI and KMI during the period 01/07/ 2013 to 30/06/2018. We used EGARCH (Nelson 1991), DCC-GARCH, static and rolling- window analysis to investigate the effects of volatility spillovers and connectedness by Diebold and Yilmaz (2012, 2014) and Mensi et al. (2018) methodology. It is concluded that MSCI and FTSE are the net recipients of shocks whereas; DJMI, JKI and KMI are net transmitters of shocks in a static spillover convention. Shock transmission process is time variant and volatility behaves in an asymmetric manner. The risk of spillover is quite sensitive to the political and economic events and it varies over time.

The world and Russia: Inflation is minimal, economic growth is slowing, risks are rising

2019 ◽  
pp. 5-23 ◽  
Author(s):  
Mikhail V. Ershov ◽  
Anna S. Tanasova
Keyword(s):  
Economic Growth ◽  
Financial Markets ◽  
World Economy ◽  
Domestic Demand ◽  
New Combination ◽  
Russian Economy ◽  
The World ◽  
World Economic ◽  
Money Creation ◽  
Main Factors

Russian economy has reached the low level of inflation, but economic growth has not accelerated. Moreover, according to official forecasts, in the following years it will still be low. The article concludes that domestic demand, which is one of the main factors of growth, is significantly constrained by monetary, budgetary and fiscal spheres. The situation in the Russian economy is still hampered by the decline of the world economic growth. The prospects of financial markets are highly uncertain. This increases the possibility of crisis in the world. Leading countries widely use non-traditional measures to support their economies in the similar environment. In the world economy as well as in Russia a principally new combination of factors has emerged, which create specific features of economic growth. It requires special set of measures to stimulate such growth. The article proves that Russian regulators have large unused potential to stimulate growth. It includes monetization, long-money creation, budget and tax stimuli. It is important that the instruments, which will be used, should be based on domestic mechanisms. This will strengthen financial basis of the economy and may encourage economic growth. Some specific suggestions as to their use are made.

Matchmakers and Markets

2020 ◽  
Author(s):  
Yi-Cheng Zhang
Keyword(s):  
Financial Markets ◽  
Policy Maker ◽  
Real World ◽  
World Economy ◽  
Market Theory ◽  
Wall Street ◽  
The Real ◽  
Information Intermediaries ◽  
Consumer Markets ◽  
High Street

In attempting to understand the bewildering complexity of consumer markets, financial markets, and beyond, traditional textbooks and theories will not help much. This book presents a new market theory in which information plays the most important role. Markets are portrayed with three categories of actor: consumers, businesses, and information intermediaries. The reader can determine his own role, and with analysis and examples from the real-world economy, new questions can be raised and individual conclusions drawn. The aim is to stimulate the reader’s own thinking, either as a consumer on the high street, an investor on Wall Street, a policy maker in a government armchair, or an entrepreneur dreaming of the next big opportunity. This book should also generate and inspire academic debates, as the claims and conclusions are often at odds with mainstream theory.

scholarly journals Bi-directional grid absorption barrier constrained stochastic processes with applications in finance & investment

2020 ◽  
Vol 10 (3) ◽  
pp. 20-33
Author(s):  
Aldo Taranto ◽  
Shahjahan Khan
Keyword(s):  
Financial Markets ◽  
Distributional Analysis ◽  
Portfolio Risk ◽  
Expected Number ◽  
Short Term ◽  
Probability Of Ruin ◽  
Loss Recovery ◽  
Risk Optimization ◽  
Gambler’S Ruin ◽  
Gambler's Ruin Problem

Whilst the gambler’s ruin problem (GRP) is based on martingales and the established probability theory proves that the GRP is a doomed strategy, this research details how the semimartingale framework is required for the grid trading problem (GTP) of financial markets, especially foreign exchange (FX) markets. As banks and financial institutions have the requirement to hedge their FX exposure, the GTP can help provide a framework for greater automation of the hedging process and help forecast which hedge scenarios to avoid. Two theorems are adapted from GRP to GTP and prove that grid trading, whilst still subject to the risk of ruin, has the ability to generate significantly more profitable returns in the short term. This is also supported by extensive simulation and distributional analysis. We introduce two absorption barriers, one at zero balance (ruin) and one at a specified profit target. This extends the traditional GRP and the GTP further by deriving both the probability of ruin and the expected number of steps (of reaching a barrier) to better demonstrate that GTP takes longer to reach ruin than GRP. These statistical results have applications into finance such as multivariate dynamic hedging (Noorian, Flower, & Leong, 2016), portfolio risk optimization, and algorithmic loss recovery.

Niezależność Narodowego Banku Polskiego a relacje z Parlamentem RP

2021 ◽  
Vol 4(165) ◽  
pp. 105-122
Author(s):  
Rafał Sura
Keyword(s):  
Central Bank ◽  
Financial Markets ◽  
World Economy ◽  
Supply And Demand ◽  
Protective Measures ◽  
Major Significance ◽  
The Common ◽  
The Republic ◽  
Polish Government

The position of the NBP at the time of the common market and progressive Europeanisation of the economy and all areas of community life was particularly important. Currently, in the time of the global crisis caused by the SARS-CoV-2 coronavirus, encompassing both the supply and demand side of the world economy, the role of the central bank is increasing. Without its involvement, there would be no effective protective measures, aimed at mitigating the decline in GDP growth in Poland and protecting jobs. The central bank, together with the Polish Government and Parliament, is of key importance for Poland’s economic development, while the independence of the NBP is of major significance for its credibility in financial markets. That is why it is so important to try to answer the questions what the independence of the NBP is and whether constitutional and statutory regulations of the relations between the Parliament of the Republic of Poland and the central bank do not breach this independence.

Correction Mechanisms Shall Set Us Free

2018 ◽  
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Systemic Risk ◽  
Credit Rating ◽  
Market Environment ◽  
Rating Agencies ◽  
Market Protection ◽  
Protection Mechanisms ◽  
Structural Mechanisms

Market protection mechanisms work well during calm periods, but some fail miserably during slowdowns, at just the time we need them to work. When the market environment turns inhospitable, the accelerators take over from the brakes. This article frames the issues concerning oversight mechanisms, which enabled the crisis, and structural mechanisms, which in many ways advanced it. We detail the potential for competition for clients to interfere with the objective judgment of three financial markets gatekeepers: the credit rating agencies, auditors, and asset pricing firms. Any perceived bias in the quality of gatekeeping services can undermine market confidence. We then explore regulatory and contractual shortcomings that, in the event of a downturn or crisis in confidence, can exacerbate a narrow complication. In addition to the classic lemons problems in the context of information asymmetries, the tight relationship between ratings and prices perpetuate any re-rating or repricing scenarios—they combine to create an overwhelming downward force. Serious action is required. If unattended, these shortcomings leave our economy needlessly exposed to the same crisis-era systemic risk concerns that present themselves when downturns can spiral, unrestrained, into meltdowns.

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