Dynamic Volatility Trading Strategies in the Currency Option Market

The conditional volatility of foreign exchange rates can be predicted using GARCH models or implied volatility extracted from currency options. This paper investigates whether these predictions are economically meaningful in trading strategies that are designed only to trade volatility risk. First, this article provides new evidence on the issue of information content of implied volatility and GARCH volatility in forecasting future variance. In an artificial world without transaction costs both delta-neutral and straddle trading stratgies lead to significant positive profits, regardless of which volatility prediction method is used. Specifically, the agent using the Implied Stochastic Volatility Regression method (ISVR) earns larger profits than the agent using the GARCH method. Second, it suggests that the currency options market is informationally efficient. After accounting for transaction costs, which are assumed to equal one percent of option prices, observed profits are not significantly differentfrom zero in most trading strategies. Finally, these strategies offered returns have higher Sharpe ratio and lower correlation with several major asset classes. Consequently, hedge funds and institutional investors who are seeking alternative “marketneutral” investment methods can use volatility trading to improvethe risk-return profile of their portfolio through diversification. This revised version was published online in November 2006 with corrections to the Cover Date.     

Optimal Bond Trading with Tax Clienteles: A Discrete-Time Dynamic Trading Model

This study develops a discrete-time dynamic trading model for bond pricing under differential taxation. The model incorporates both the tax-timing option effect and the tax-clientele effect. Investors from all tax brackets have a chance to bid for a bond, and the marginal investor is the one who is willing to pay the highest price. Simulation results show that inter-bracket trading occurs frequently as the interest rate changes, which enhances the value of the tax option. These results are shown to be robust to changes in interest rate process and tax regimes.     

Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts

This article documents the main stylized features of macroeconomicfluctuations for 12 developing countries. It presents cross-correlationsbetween domestic industrial output and a large group of macroeconomicvariables, including fiscal variables, wages, inflation, money,credit, trade, and exchange rates. Also analyzed are the effectsof economic conditions in industrial countries on output fluctuationsin the sample developing countries. The results point to manysimilarities between macroeconomic fluctuations in developingand industrial countries (procyclical real wages, countercyclicalvariation in government expenditures) and some important differences(countercyclical variation in the velocity of monetary aggregates).Their robustness is examined using different detrending procedures.     

Performance of Currency Trading Strategies in Developed and Emerging Markets: Some Striking Differences

Expanding the currency investment universe makes a lot of sense from a diversification point of view. Nevertheless, 60% of the total foreign exchange turnover is still only traded in three currency pairs (USD/EUR, USD/JPY and USD/GBP). The share of trading in local currencies in emerging markets is only around 5%. This can be explained by the fact that some currency managers fear investing in emerging market currencies. Many believe that political risk is the most dominant driver in these markets and that traditional investment rules do not work. In this paper, I apply four technical trading strategies for the developed market currencies and for the most traded emerging market currencies. The empirical results show some striking differences. They suggest that trend-following rules work better for emerging market currencies, while carry trading strategies perform better across developed market currencies. Nevertheless, it seems that conventional techniques could be successfully applied to both developed and emerging market currencies. I conclude that currency managers should not be afraid to diversify into emerging market currencies. They should, however, adjust their trading style accordingly.     

Strategic Trading in a Dynamic Noisy Market

This paper studies a dynamic model of a financial market with a strategic trader. In each period the strategic trader receives a privately observed endowment in the stock. He trades with competitive market makers to share risk. Noise traders are present in the market. After receiving a stock endowment, the strategic trader is shown to reduce his risk exposure either by selling at a decreasing rate over time or by selling and then buying back some of the shares sold. When the time between trades is small, the strategic trader reveals the information regarding his endowment very quickly.     

Price Setting in the Euro Area: Some Stylized Facts from Individual Producer Price Data

This paper summarizes the microevidence on the setting of producer prices in the euro area. The main findings are: (i) 21% of producer prices are adjusted each month, (ii) producer prices are changed more frequently and by smaller amounts than consumer prices (even after controlling for product characteristics), (iii) price decreases are relatively frequent, (iv) inflation correlates positively with the difference between the frequency of price increases and decreases, and (v) there is substantial variation in price flexibility across sectors, which can be explained in part by differences in the cost structure, the degree of competition, and the level of sectoral inflation.     

Equilibrium in a Dynamic Limit Order Market

We model a dynamic limit order market as a stochastic sequential game with rational traders. Since the model is analytically intractable, we provide an algorithm based on Pakes and McGuire (2001) to find a stationary Markov‐perfect equilibrium. We then generate artificial time series and perform comparative dynamics. Conditional on a transaction, the midpoint of the quoted prices is not a good proxy for the true value. Further, transaction costs paid by market order submitters are negative on average, and negatively correlated with the effective spread. Reducing the tick size is not Pareto improving but increases total investor surplus.     

Order Imbalance in the FTSE Index Futures Market: Electronic versus Open Outcry Trading

Abstract:  This study examines trading activities before and after the transfer of the FTSE 100 index futures contract from open outcry to electronic trading. Daily order imbalance exhibits strong serial persistence in the electronic limit order market, but not in open-outcry trading. Both excess buying and selling reduce liquidity. In the electronic venue, prior market movements barely affect investors' buying or selling decisions. Excess buy orders do not generate any price impact, but sell orders do. Positive imbalances are more strongly autocorrelated than negative imbalances. No trading elements, such as order imbalance, volume, or open interest, are associated with volatility. Moreover, excess buying decreases volatility. Such evidence suggests that the development and growth of electronic trading has changed the dynamics of trading activities in many important ways.     

Risk in Dynamic Arbitrage: The Price Effects of Convergence Trading

I develop an equilibrium model of convergence trading and its impact on asset prices. Arbitrageurs optimally decide how to allocate their limited capital over time. Their activity reduces price discrepancies, but their activity also generates losses with positive probability, even if the trading opportunity is fundamentally riskless. Moreover, prices of identical assets can diverge even if the constraints faced by arbitrageurs are not binding. Occasionally, total losses are large, making arbitrageurs' returns negatively skewed, consistent with the empirical evidence. The model also predicts comovement of arbitrageurs' expected returns and market liquidity.     

Liquidity Provision of Limit Order Trading in the Futures Market Under Bull and Bear Markets

Abstract:  This study investigates how limit orders affect liquidity in a purely order-driven futures market. Additionally, the possible asymmetric relationship between market depth and transitory volatility in bull and bear markets and the effect of institutional trading on liquidity provision behavior are examined as well. The empirical results demonstrate that subsequent market depth increases as transient volatility increases in bull markets. Market depth exhibits significantly positive relationship to subsequent transient volatility in bull markets. Additionally, although trading volume positively influences transient volatility in bull markets, no such relationship exists in bear markets. Liquidity provision decreases when institutional trading activity intensifies during bear markets. Thus, liquidity provision for limit orders differs between bull and bear markets.     

保险合同的一些法律问题

我国保险法研究尚处于发展阶段,有关保险合同问题的认识比较混乱.本文针对争论比较多的保险合同的特征、保险合同中的要约与承诺、保险合同的形式以及保险利益等四个问题展开分析和讨论.文中充分利用了已有的研究成果,通过对比发现一些问题,并结合司法实践对相关问题进行再认识,从而提出了一些新的观点.     

金融市场化改革中应注意的几个问题

在我国目前正在经历的改革中,对整个经济、政治、社会和思想文化生活诸方面影响最为普遍深刻的,便是建立社会主义市场经济体制方面的改革,简称为市场化改革。市场化改革的推进,客观上要求方方面面的改革与之相适应,金融机构也是一     

农村信用社创建信用工程中的问题

"农村信用工程"是农村信用社开展的一项重要工程,中国人民银行于1999年7月下发了<农村信用社农户小额信用贷款管理办法>(银发[1999]245号)中首次对小额信用贷款的管理及使用做了明确规定.     

Optimal Proportional Reinsurance Policies in a Dynamic Setting

We consider dynamic proportional reinsurance strategies and derive the optimal strategies in a diffusion setup and a classical risk model. Optimal is meant in the sense of minimizing the ruin probability. Two basic examples are discussed.     

对金融衍生品市场内幕交易的一些新思考--澳大利亚现行的反内幕交易法及其带给我们的若干启示

本文着眼于澳大利亚在治理金融衍生品市场内幕交易中积累的丰富经验,针对一个崭新的前瞻性课题,即金融衍生品市场的内幕交易问题展开研究。作者认为,由于内幕交易与信息非对称性之间存在的内在冲突,实际上反内幕交易法规很难有效地阻止金融衍生品的内幕交易行为,过于复杂的反内幕交易法规会对市场产生一些负面影响,而放松内幕交易监管这一新思维将对市场的良性发展更为有益,应该让市场来决定内幕交易行为的“存亡”。但目前最为现实、温和的选择仍然是修改现行反内幕交易法,以维护市场的公平性和有效性。最后,笔者对如何缓解中国目前内幕交易猖獗的现状提出建议。     

Trend‐Following Trading Strategies in U.S. Stocks: A Revisit

We show that previous findings regarding the profitability of trend‐following trading rules over intermediate horizons in futures markets also extend to individual U.S. stocks. Portfolios formed using technical indicators such as moving average or channel ratios, without employing cross‐sectional rankings of any kind, tend to perform about as well as the more commonly examined momentum strategies. The profitability of these strategies appears significant, both statistically and economically, through 2007, but evidence of profitability vanishes after 2007. Market‐state dependence, while clearly present, does not explain the post‐2007 reduction in returns to these strategies.     

小额贷款公司发展中存在的问题

一是融资难,经营资金受限。辖内某小额贷款公司注册资金为5000万元,2009年末贷款余额5060万元,贷款发放已经超过自有资金,急需金融机构予以融资,但难以从辖内金融机构融入资金,制约了小额贷款公司业务的持续发展。     

我国银行业在反洗钱工作中遇到的难题及对策——基于监管者与银行信息不对称角度

金融机构在一国支付体系及金融资产托收和转移过程中具有独特的作用．使得洗钱者将金融机构作为了洗钱的首选渠道,在金融机构中又以银行业为主要渠道,因此,以银行业为主的金融机构就始终站在反洗钱的第一线,是反洗钱的核心力量,且相对于监管部门有处在信息优势的位置．但银行业在共享信息过程中所付出的包括资源流失、成本增加等都是显而易见的,而能获得收益却基本上都是隐性的,收益和成本无法匹配。本文试图通过建立金融业的反洗钱成本补偿机制和激励机制来解决这个问题,使其愿意主动与监管部门共享其优势信息,从而解决反洗钱工作中监管者与银行业信息不对称的难题。     

股权质押的若干法律问题与对策

股权融资在未来融资形式中将越来越突出其地位和作用，股权质押的法律问题及实行股权质押的法律手续因其股权类型多、不规范，面临的问题很多。只有在进行股权质押时充分注意法律可行性，才能最大限度的维护股权质押双方当事人的合法权益。     

《税收征管法》存在的问题及修改意见

现行<中华人民共和国税收征收管理法>(以下简称<征管法>)统一了内外税收征管制度,提高了法律规范效力级次,而且在税收立法权、行政执法权以及对纳税人合法权益的保护等方面都有较大的进步和突破.但随着市场经济的飞速发展和税收环境的不断变化,<征管法>暴露出自身的不足.具体操作上存在的困难,削弱了税法的应有功能,现就其中的几个问题做一分析.