I use Google News TM to study the relation between news volumes and stock market volatilities. More than nine million stock market-related news stories in English and (Mandarin) Chinese are collected and the dynamics of the news volume and the stock market volatility is compared in both the...

This paper looks at the asset correlation bias resulting from firms’ assets and liabilities being denominated in different currencies. It focuses on the time-variation in the bias and on the dependency of the bias on currency movements. Both the volatility of the exchange rate and the...

This study discusses how to compute and forecast long-term stock return volatilities, typically with a 5-year horizon or longer, using credit derivatives, and how such volatilities can be used in different areas ranging from the valuation of employee stock options and other long-term derivatives...

In this paper we employ the news aggregator GoogleTM News to demonstrate a strong link between the volatility in the stock market and the amount of news available to market participants. The paper also highlights some other areas, in finance and elsewhere, where news aggregators could be useful.

Numerous empirical studies have shown evidence of nonlinearities in financial time series, which can be of both a deterministic and a stochastic nature. Chaos is an example of the former, and heteroscedasticity in the conditional variance an example of the latter. We apply a test, the BDS test,...

The aim of this paper is to highlight a potentially very fruitful link between micro-entrepreneurs and the international capital markets. We discuss the role structured finance and credit derivatives could play in extending finance to micro-entrepreneurs on a much larger scale than today’s...

A "compass rose" pattern sometimes appears when stock returns are plotted against themselves with a one-day lag, since stock prices move in discrete steps. In this paper, we perform a Monte Carlo study on simulated stock price series rounded in different ways to mirror the behavior of stocks on...

Considering the increasingly international banks of today, the health ofa country’s banking sector is crucial not only to the country’s growthand prosperity but also to the rest of the international financialcommunity. Early warning signals of a banking sector in trouble or apending banking...

The Nordic Power Exchange (Nord Pool), the first multinational exchange for electricity trading, has existed since January 1996. Spot and futures contracts are traded on this exchange and its typical characteristics are very high volatility as well as non-normally distributed returns. In this...

In this paper we suggest a simple way of backing out market-wide risk-neutral default probability (and default density) distributions from quoted credit default swap (CDS) index spreads. We apply the approach to two market-wide European portfolios represented by two frequently traded iTraxx...