This paper analyses the intraday co-movements between returns on several commodity markets and on the stock market in the United States over the 1997-2011 period. By exploiting a new high frequency database, we compute various rolling correlations at (i) 1-hour, (ii) 5-minute, (iii) 10-second,...

The recent financial crisis renewed concerns about a possible destabilizing impact of derivatives trading. Despite a very active research, the question whether or not derivatives tend to destabilize financial markets has not yet been answered to satisfaction. This contribution aims to revise the...

Futures contracts on the New York Mercantile Exchange are the most liquid instruments for trading crude oil, which is the world’s most actively traded physical commodity. Under normal market conditions, traders can easily find counterparties for their trades, resulting in an efficient market...

In the classical quantitative finance literature it is assumed that there is a risk free rate at which hedgers can borrow and lend in the dynamic replication process of financial derivatives. In such a framework, under complete market conditions and absence of arbitrage opportunities, for a...

In this paper we explore the components that should be incorporated in the price of an uncolateralized derivative. We assume that one counterparty will act as the derivatives hedger while the other will act as the investor. Therefore, the derivative's price will reflect the replication costs...

For deals denominated in a single currency, different collateralization schemes imply different accrual rates for funds posted as collateral, so that we can end up with different current accounts that accrue at different rates and their corresponding discount factors. In this paper we examine...

The development of a successful futures market in crude oil, petroleum products, propane, and, most recently, natural gas has been one of the most fundamental changes to occur in oil and gas markets in recent years. This article provides an introduction to those markets, including their...

As a byproduct of the 2007-2008 credit crunch, derivatives pricing and risk management are experiencing a dramatic transformation. Assumptions that were widely accepted not long ago, like absence of counterparty credit risk and the existence of a unique risk free curve available for every...

We examine whether hedging effectiveness is affected by asymmetry in the return distribution by applying tail specific metrics to compare the hedging effectiveness of short and long hedgers using Oil futures contracts. The metrics used include Lower Partial Moments (LPM), Value at Risk (VaR) and...

The market evolution since the end of 2007 has been characterized by an increase of systemic risk and a high number of defaults. Realized recovery rates have been very dispersed and different from standard assumptions, while 60%-100% super-senior tranches on standard indices have started to...