We argue that the rapid asset growth of nonbank financial intermediaries (NBFIs) relative to banks is the outcome of transformations of risks between banks and NBFIs that increase the interconnectedness of the two sectors. These transformations are consistent with avoiding tighter, post-GFC bank...

The literature on derivative pricing in illiquid markets has mostly focused on computing optimal hedging controls, but empirical microstructure studies show that large order flow generates persistent and predictable price effects. Therefore, these controls can themselves induce endogenous market...

The relationship between Credit Default Swaps (CDS) and cash bonds plays a pivotal role in providing market participants with important information which directly affects investment and risk management strategies. Particularly relevant is the CDS-Bond basis, defined as the difference in basis...

In this paper, we analyse data from 493 listed banks across 28 countries to investigate the impact and mechanisms through which banks' derivatives holdings influence systemic risk. Our empirical results indicate that banks' derivatives holdings significantly increase systemic risk. Regarding the...

The rapid advancement of quantum computing has sparked a considerable increase in research attention to quantum technologies. These advances span fundamental theoretical inquiries into quantum information and the exploration of diverse applications arising from this evolving quantum computing...

In this study, we propose a Gram-Charlier expansion approach to investigate the impact of skewness and kurtosis on production and hedging decisions. Consistent with the existing literature, we find that skewness and kurtosis do not affect decisions regarding optimal production; however, they...

This study examines the impact of futures trading on market efficiency and price discovery in the U.S. real estate investment trusts (REITs) market. First, we present inconclusive evidence regarding efficiency improvement in the U.S. REIT spot market following the introduction of futures...

This study unravels the transmission of volatility spillovers between NIFTY 50 spot prices and the options market, addressing a significant gap in existing studies. It captures how market connectedness evolved during the pre-COVID, COVID and post-COVID periods, offering fresh insights into price...

This study investigates the mispricing dynamics of index futures across global markets using Vector Autoregressive (VAR) and Autoregressive with Exogenous Variables (ARX) models. Analyzing daily data from 2006 to 2023 for 16 index futures spanning the Asia-Pacific, Europe, and the Americas, the...

This report overviews the IMF technical assistance mission to enhance Ukraine's FX derivatives market amidst ongoing economic challenges. In navigating the complex environment, the National Bank of Ukraine (NBU) imposed FX restrictions to manage flows, complicating normalization of financial...

We demonstrate the asset pricing implications of investors' belief heterogeneity in the frequency of news arrival and its joint impact with heterogeneous beliefs about news content. Investors trade volatility derivatives against each other to speculate on the rate of news arrival: greater...

This study investigates whether and how the complexity of derivative use influences the stock price crash risk in China's capital market, a critical question given the growing use of derivatives in emerging economies where governance structures and disclosure standards vary widely. While prior...

The popular Wishart (WI) processes, first introduced by Bru in 1991, exhibit convenient analytical properties for modeling asset prices, particularly a closed-form characteristic function, and the ability to jointly model stochastic volatility and correlation. These features tend to increase...

This paper demonstrates that perfectly calibrating a multi-asset model to observed market prices of all basket call options is insufficient to uniquely determine the price of a best-of call option. Previous research on multi-asset option pricing has primarily focused on complete market settings...

In this paper, we study perpetual American put options with a generalized standard put payoff and establish sufficient conditions for the existence and uniqueness of the solution to the associated pricing problem. As a key tool, we express the Black-Scholes operator in terms of elasticity. This...

A robust model for natural gas prices should simultaneously capture the observed prices of both futures and options. While incorporating a seasonal factor in the convenience yield of the spot price effectively replicates forward curves, it proves insufficient for accurately modelling the options...

This paper enhances the calibration procedure for pricing spread options with liquidity risk. The novelty is the use of Chebyshev interpolation to fit the prices.Numerical experiments reveal that the calibrated parameters are close to the ones obtained by a previous work. However, the fit...