After the global financial crisis, there is greater awareness of the need to understand the interactions between the financial sector and the real economy and hence the potential for financial instability.  Data from the financial flow of funds, previously relatively neglected, are now seen as...

This paper presents a tractable model of non-linear dynamics of market returns using a Langevin approach.Due to non-linearity of an interaction potential, the model admits regimes of both small and large return fluctuations. Langevin dynamics are mapped onto an equivalent quantum mechanical (QM)...

In this paper, we use the DCC MIDAS approach to assess the validity of the wake-up call hypothesis for developed and emerging markets during the global financial crisis (GFC). We use this approach to decompose the total correlations into short- (daily) and long-run (quarterly) correlations for...

I employ experimental methods to study the way financial professionals adapt investment strategies in sovereign-bonds during financial crises. I find that when the complexity of the environment increases, investors reduce information processing and shift to strategies in which they...

Using daily options prices on the Eurostoxx 50 stock index over the whole year 2008, we compare the performance of three popular stochastic volatility models (Heston, 1993; Bates, 1996; Heston and Nandi, 2'007, in addition to the traditional Black-Scholes model and a proprietary trading desk model. We...

In the U.S., over 1873-2014, an increase in bank credit is associated with a lower risk of a financial crisis in the near future. Bank credit expansion predicts lower excess returns and volatility for the aggregate stock market, and this predictive relation varies in the cross-section and is...

This paper brings together two strands of the literature: Quantifying the impact of apocalyptic risk on capital markets, and the correct computation of the equity risk premium. For the former, we use events in four countries during the Second World War to discern markets' incorporation of...

We decompose hedge fund tail risk into two components: Systematic Conditional Tail Risk (SCTR) arising predictably from equity market exposure, and Idiosyncratic Conditional Tail Risk (ICTR) arising from proprietary investment technology. Using option holdings data, we demonstrate that low-SCTR...

The paper concentrates on the value premium across countries and contributes to the nvestment and asset pricing literature in three ways. First, I provide fresh evidence that the high-value countries perform significantly better than the low-value countries. Additionally, this phenomenon is...

We show that cross-border financial flows arise when countries differ in their abilities to use assets as collateral. Financial integration is a way of sharing scarce collateral. The ability of one country to leverage and tranche assets provides attractive financial contracts to investors in the...