Forward exchange rate bias explanation generally falls into two categories – assumption of rational expectation resulting in a risk premium and expectation errors which is systematic. The paper tests the bias in the Indian forward exchange markets using one-month and three month forward...

We put forward a new option pricing formula based on the notion that people tend to think by analogies and comparisons. The new formula differs from the Black Scholes formula due to the appearance of a parameter in the formula that captures the risk premium on the underlying. The new formula,...

The price determinants of gold are explained in this paper. Benefits from holding gold as an investment class asset in several forms, including ETFs are explored. Disadvantages of holding various gold investments are described, particularly in Contango markets. The gold prices are examined in...

This research represents some thoughts on the accurate characterization of the stock market indexes trends in the conditions of the nonlinear capital flows at the stock exchanges in the global capital markets. We make our original research proposal that the nonlinear capital flows in the process...

Maturity transformation coupled with open foreign exchange positions expose financial intermediaries to unexpected changes in interest and exchange rates. This paper proposes to measure the degree of banks exposure to market risks by taking the variance of the total differential of the bank...

In this study we investigate using the mean reversion processes in financial risk management, as they provide an good description of stock price uctuations and market risks. This paper does not aim at being exhaustive, but gives examples for practically implementable models allowing for stylised...

In the article two methods of estimating fractal dimension of financial time series are compared: variation method and method of area division. Both methods are used to estimate fractal dimension of chosen exchange rates time series.

We show that the profitability of currency carry trades can be understood as the compensation for exchange rate misalignment risk based on the rare disastrous model of exchange rates (Farhi and Gabaix, 2008). It explains over 97% of the cross-sectional excess returns and dominates other...

Long memory in variance or volatility refers to a slow hyperbolic decay in auto-correlation functions of the squared or log-squared returns. GARCH models extensively used in empirical analysis do not account for long memory in volatility. The present paper examines the issue of long memory in...