Arbitrage and liquidity are interrelated. Liquidity facilitates arbitrageurs’ trading on deviations from the law of one price. However, whether arbitrage opportunity leads to an increase or decrease in liquidity depends on the cause of the deviation. A demand shock leads to greater liquidity,...

Since the collapse of the Metallgesellschaft AG due to hedging losses in 1993, energy practitioners have been concerned with the ability to hedge long-dated linear and non-linear oil liabilities with short-dated futures and options. This paper identifies a model-free non-parametric approach to...

In this paper, we evaluate American-style, path-dependent derivatives with an artificial intelligence technique. Specifically, we use swarm intelligence to find the optimal exercise boundary for an American-style derivative. Swarm intelligence is particularly efficient (regarding computation and...

The 2008 credit crisis changed the manner in which derivative trades are conducted. One of these changes is the posting of collateral in a trade to mitigate the counterparty credit risk. Another is the realization that banks are not risk-free and, as a result, cannot borrow at the risk-free rate...

This paper provides global evidence supporting the hypothesis that expected return models are enhanced by the inclusion of variables that describe the evolution of book-to-market-changes in book value, changes in price, and net share issues. This conclusion is supported using data representing...

In this paper we develop a comprehensive Vector Autoregression Model consisting of five variables; the stock market and price indices of pairs of countries, as well as their bilateral nominal exchange rate. Then, we show that under certain long-run restrictions, our approach encompasses a large...

This paper examines the impact of changes in economic policy uncertainty (EPU) and COVID-19 shock on stock returns. Tests of 16 global stock market indices, using monthly data from January 1990 to August 2021, suggest a negative relation between the stock return and a country’s EPU. Evidence...

This study employs the Vector Autoregressive-Generalized Autoregressive Conditional Heteroskedasticity (VAR-AGARCH) model to examine both return and volatility spillovers from the USA (developed) and China (Emerging) towards eight emerging Asian stock markets during the full sample period, the...

This study uses the BEKK-GARCH model to examine the return-and-volatility spillover between the world-leading markets (USA and China) and four emerging Latin American stock markets over the global financial crisis of 2008 and the crash of the Chinese stock market of 2015. Regarding return...

We investigate the risk-return trade-off on the US and European stock markets. We investigate the non-linear risk-return trade-off with a special eye to the tails of the stock returns using quantile regressions. We first consider the US stock market portfolio. We find that the risk-return...