The diversity of high-frequency traders

The regulatory debate concerning high-frequency trading (HFT) emphasizes the importance of distinguishing different HFT strategies and their influence on market quality. Using data from NASDAQ-OMX Stockholm, we compare market-making HFTs to opportunistic HFTs. We find that market makers constitute the lion's share of HFT trading volume (63–72%) and limit order traffic (81–86%). Furthermore, market makers have higher order-to-trade ratios and lower latency than opportunistic HFTs. In a natural experiment based on tick size changes, we find that the activity of market-making HFTs mitigates intraday price volatility.     

The relation between implied and realised volatility in the Danish option and equity markets

We show that the conclusions to be drawn concerning the informational efficiency of illiquid options markets depend critically on whether one carefully recognises and appropriately deals with the econometrics of the errors‐in‐variables problem. This paper examines the information content of options on the Danish KFX share index. We consider the relation between the volatility implied in an option's price and the subsequently realised index return volatility. Since these options are traded infrequently and in low volumes, the errors‐in‐variables problem is potentially large. We address the problem directly using instrumental variables techniques. We find that when measurement errors are controlled for, call option prices even in this very illiquid market contain information about future realised volatility over and above the information contained in historical volatility.     

Trading volume and stock market volatility: The Polish case

Relying on the mixture of distributions hypothesis (MDH), this paper investigates the relationship between daily returns and trading volume for 20 Polish stocks. Our empirical results show that in the majority of cases volatility persistence tends to disappear when trading volume is included in the conditional variance equation, which is in agreement with the findings of studies on developed stock markets. However, we cannot confirm the testable implications of the MDH in all cases, which indicates that future research on the causes and modeling of Polish stock market volatility is necessary.     

Implied volatility skews and stock return skewness and kurtosis implied by stock option prices

The Black-Scholes* option pricing model is commonly applied to value a wide range of option contracts. However, the model often inconsistently prices deep in-the-money and deep out-of-the-money options. Options professionals refer to this well-known phenomenon as a volatility ‘skew’ or ‘smile’. In this paper, we examine an extension of the Black-Scholes model developed by Corrado and Su that suggests skewness and kurtosis in the option-implied distributions of stock returns as the source of volatility skews. Adapting their methodology, we estimate option-implied coefficients of skewness and kurtosis for four actively traded stock options. We find significantly nonnormal skewness and kurtosis in the option-implied distributions of stock returns.     

中央银行沟通对人民币汇率波动的影响

本文首先在开放经济环境下基于传统非套补利率平价理论,将中央银行沟通指示器引入理论模型进行研究。然后以2006年10月-2014年12月期间中国人民银行沟通频数和人民币汇率数据为样本,采用EGARCH模型实证分析了中央银行沟通对人民币汇率波动的总体影响、不同沟通渠道以及口头沟通的不同主体、不同内容和不同货币政策取向沟通对人民币汇率波动的影响程度。实证结果显示:(1)中央银行沟通对人民币汇率波动有较为显著的影响;(2)书面沟通的作用效果优于口头沟通;(3)口头沟通中行长沟通与他人沟通相比更有效;(4)口头沟通中关于货币政策取向沟通的效果优于宏观经济展望;(5)宽松意图沟通的效果优于紧缩意图。本文的研究表明,中央银行沟通可在汇率的预期管理中发挥积极作用,促进汇率平稳波动;在沟通策略上,应注重发展口头沟通,并重视宽松意图沟通的运用。     

Modeling volatility and changes in the swap spread

We investigate the determinants of changes in U.S. interest rate swap spreads using a model that explicitly allows for volatility interactions between swaps of different terms to maturity. Changes in the swap spread are found to be positively related to interest rate volatility, to changes in the default risk premium in the corporate bond market, and to changes in the liquidity premium for government securities. Swap spread changes are negatively related to changes in the level of interest rates and changes in the slope of the term structure. We also find that there is a strong and significant volatility interaction among spreads for swaps of different maturities and that the process for the conditional variance of the spread is highly persistent across all maturities.     

Currency futures, news releases, and uncertainty resolution

The effects of domestic macroeconomic news releases on futures on the British Pound (BP), Canadian Dollar (CD), Deutsche Mark (DM), Japanese Yen (JY), and Swiss Franc (SF) are examined. The results show that all five futures respond to the release of macroeconomic news, especially the first set of news releases issued at 7:30 a.m. (CST). Results of tests that identify the effects of individual announcements suggest that news in the Employment Report, the Trade Deficit, Industrial Production, and Capacity Utilization affects all five futures. Other announcements do not have such widespread effects. Volatility increases following the announcements persist for some time. Such increases are not uniform across the five instruments. For instance, following the 7:30-a.m. announcements, for the JY, BP, and SF, higher variance is observed for 30 min. However, for the DM and CD, the increase is 45 and 15 min, respectively.     

The intra-day impact of communication on euro-dollar volatility and jumps

In this paper, we examine the intra-day effects of verbal statements and comments on the FX market uncertainty using two measures: continuous volatility and discontinuous jumps. Focusing on the euro-dollar exchange rate, we provide empirical evidence of how these two sources of uncertainty matter in measuring the short-term reaction of exchange rates to communication events. Talks significantly trigger large jumps or extreme events for approximately an hour after the news release. Continuous volatility starts reacting prior to the news, intensifies around the release time and stays at high levels for several hours. Our results suggest that monetary authorities generally tend to communicate with markets on days when uncertainty is relatively severe, and higher than normal. Disentangling the US and Euro area statements, we also find that abnormal levels of volatility are mostly driven by the communication of the Euro area officials rather than US authorities.     

Is more finance better? Disentangling intermediation and size effects of financial systems

Financial systems all over the world have grown dramatically over recent decades. But is more finance necessarily better? And what concept of financial system – a focus on its size, including both intermediation and other auxiliary “non-intermediation” activities, or a focus on traditional intermediation activity – is relevant for its impact on real sector outcomes? This paper assesses the relationship between the size of the financial system and intermediation, on the one hand, and GDP per capita growth and growth volatility, on the other hand. Based on a sample of 77 countries for the period 1980–2007, we find that intermediation activities increase growth and reduce volatility in the long run. An expansion of the financial sectors along other dimensions has no long-run effect on real sector outcomes. Over shorter time horizons a large financial sector stimulates growth at the cost of higher volatility in high-income countries. Intermediation activities stabilize the economy in the medium run especially in low-income countries. As this is an initial exploration of the link between financial system indicators and growth and volatility, we focus on OLS regressions, leaving issues of endogeneity and omitted variable biases for future research.     

基于DC-t-MSV模型的套期保值研究

利用多元随机波动率模型确定最优套期保值率：首先建立动态相关系数多元随机波动率模型（DC-MSV）,再建立基于t分布的动态相关系数多元随机波动率模型（DC-t-MSV）。以沪深300股指期货数据为样本,利用以上两种模型分别结合方差最小套期保值模型计算最优套期保值率,结果表明,利用DC-t-MSV模型的套期保值效果优于DC-MSV模型。DC-t-MSV模型引入t分布,充分考虑了金融数据尖峰厚尾的特性;同时,参数估计部分采用马尔科夫链蒙特卡罗模拟方法（MCMC）,克服了MSV模型参数估计困难的缺点。