In this paper, we investigate non-linear linkages between Bitcoin and the unconventional monetary policies of the European Central Bank (ECB). In particular, we examine whether a low-interest rate environment resulting from QE indirectly encourages investors to move towards Bitcoin. Using a...

In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

There has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their...

While the 2008-2009 fi nancial crisis originated in the United States, we witnessed steep declines in output, consumption and investment of similar magnitudes around the globe. This raises two questions. First, given the observed strong home bias in goods and fi nancial markets, what can account...

We present an agent-based model (ABM) of a financial market with n 1 risky assets, whose price dynamics result from the interaction between rational fundamentalists and trend following imitative noise traders. The interactions and opinion formation of the noise traders are described by an...