The use of close-to-close returns underestimates returns correlation because international stock markets have different trading hours. With the availability of 16:00 (London time) stock market series, we find dynamics of daily correlation and daily covariance, estimated using two...

The sum of squared intraday returns provides an unbiased and almost error-free measure of ex-post volatility. In this paper we develop a nonlinear Autoregressive Fractionally Integrated Moving Average (ARFIMA) model for realized volatility, which accommodates level shifts, day-of-the-week...

The mixture of distributions hypothesis (MDH) posits that price volatility and trading volume are determined by the same information arrival rate. Existing studies that test MDH have the problem that both the information arrival rate and volatility are unobservable. Recent work (e.g. Andersen,...

Momentum returns have time-varying exposures to the three Fama and French equity risk factors. In particular factor loadings are higher when the factor returns during the ranking period are higher. In this study we look at momentum returns after hedging the time-varying exposures to the Fama and...

On June 24, 1997, the New York Stock Exchange reduced the minimum change for stock prices and quotes from an eighth to a sixteenth of a dollar. This study investigates the impact of the resulting decrease in spreads on Samp;P 500 index-futures arbitrage. For the period after June 24, 1997, we...

This paper compares the pricing and hedging performance of the LMM model against two spot-rate models, namely Hull-White and Black-Karasinski, and the more recent Swap Market Model from an Asset-Liability-Management (ALM) perspective. In contrast to previous studies in the literature, our...

This paper tests the co-terminal swap market model (SMM) pricing and hedging performance on Bermudan swaptions. To our knowledge, the drift for SMM is derived explicitly for the first time here, and the procedures for calibration and simulation using a collection of forward swap rates are also...

This paper re-examines the issue of persistence and mean reversion in UK stock returns in the light of new developments published in Chow and Denning (1993). The random walk hypothesis is tested using multiple variance ratios for returns on the Financial Times All Share Index and 330 individual...