We measure message processing time or latency inside an automated trading platform. We show that latency is a random variable that has a strong predictive power over both volatility and the volatility of volatility of a highly liquid asset over and above changes in message traffic. We argue that...

This paper exploits a natural experiment from the late 1800s in which many U.S. firms had inadvertently issued both taxable and tax-exempt bonds. Investors paid income tax on taxable bonds, but firms covered income tax on investors' behalf on tax-exempt bonds. Using a unique data-set of these...

Current methods of risk management focus on efficiency and do not provide operational answers to the basic question of how to optimise and balance the two objectives, maximisation of expected income and minimisation of risk. This paper uses the Capital Asset Pricing Model (CAPM) to derive an...

Current methods of risk management focus on efficiency and do not provide operational answers to the basic question of how to optimise and balance the two objectives, maximisation of expected income and minimisation of risk. This paper uses the Capital Asset Pricing Model (CAPM) to derive an...

Recent theoretical models suggest that the costs governments face when defaulting on their domestic and external debt may differ considerably. This paper examines if this proposed cost difference is reflected in sovereign risk spreads across domestic and foreign markets. Specifically, I analyze...

This paper shows that geographical investor heterogeneity strongly influences sovereign risk. While standard sovereign debt models mainly attribute the absence of sovereign defaults to foreign creditor retaliation, a new theoretical literature argues that domestic creditors also affect borrowing...

In this paper, we study the determinants of expected returns on the listed penny stocks from two perspectives. Traditionally financial economics literature has been devoted to study the macro and micro determinants of expected returns on stocks (Subrahmanyam, 2010). Very few research has been...

Institutional investors, such as pensions and insurers, are typically constrained to hold enough wealth to be able to make their contractually promised payments to fund beneficiaries. This creates an additional risk in the economy, namely the risk of funding shortfall. We seek to explore the...