This paper introduces an entropy approach to measuring market expectations with respect to overnight interest rates in an inter-bank money market. The findings for the Turkish 2000-2001 borrowing crisis suggest that a dynamic, non-extensive entropy framework provides a valuable insight into the...

Financial option prices have experienced excessive volatility in response to the recent economic and financial crisis. During the crisis periods, financial markets are, in general, subject to an abrupt regime shift which imposes a significant challenge to option pricing models. In this context,...

This paper investigates the multiscale (frequency-dependent) relationship between technical trading profitability and feedback trading effects in the Canada/U.S. dollar foreign exchange market. The results suggest weak evidence that technical trading activities of financial and non-financial...

This paper investigates a non-parametric modular neural network (MNN) model to price the S&P-500 European call options. The modules are based on time to maturity and moneyness of the options. The option price function of interest is homogenous of degree one with respect to the underlying index...

This paper develops a wavelet (spectral) approach to estimate the parameters of a linear regression model where the regressand and the regressors are persistent processes and contain a measurement error. We propose a wavelet filtering approach which does not require instruments and yields...

We develop a dynamic framework to identify aggregate market fears ahead of a major market crash through the skewness premium of European options. Our methodology is based on measuring the distribution of a skewness premium through a q-Gaussian density and a maximum entropy principle. Our...

Conventional time series analysis, focusing exclusively on a time series at a given scale, lacks the ability to explain the nature of the data generating process. A process equation that successfully explains daily price changes, for example, is unable to characterize the nature of hourly price...

We examine a recent set of high-frequency spot EUR-USD foreign exchange transaction data from an electronic foreign exchange market. Our framework is based on a continuous time-sequential microstructure trade model that measures the market makers beliefs directly. We present evidence of the...

Fundamental spot exchange rate models preclude the existence of asymmetric information in foreign exchange markets. This article critically investigates the possibility that private information arises in the spot foreign exchange market. Using a rich dataset, we first empirically detect...

This paper concentrates on quantifying the behavioral aspects of systemic risk by using a novel approach based on entropy. More specifically, we study aggregate market expectations and the predictability of the systemic risk before and during the financial crisis in 2008. Two underlying signals...