Do exchange rates react to exogenous capital movements? We explore this issue based on the redefinition of the MSCI international equity indices announced on 10 December 2000 and implemented in two steps on 30 November 2001 and 31 May 2002. The index changes implied major changes in the...

This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the...

Listing of stocks on the stock exchange offers business firms several advantages such as diversification, liquidity, establishing a value for the firm etc. The present paper analyses stocks of six commercial banks (viz., Dubai Commercial Bank, Emirates Bank International, National Bank of Dubai,...

We consider the debt capacity of a risky asset when debt is being rolled over and there is a liquidation cost in case of default. We show that debt capacity depends on how information about the quality of the asset is revealed. When the information structure is based on “optimistic”...

This paper studies the impact of credit rating agency (CRA) announcements on the value of the Euro and the yields of French, Italian, German and Spanish long-term sovereign bonds during the culmination of the Eurozone debt crisis in 2011-2012. The employed GARCH models show that CRA downgrade...

When rates of return on bonds are computed over extremely short holding periods, the ex post cross-sectional relationship between realized return and risk is linear. It is therefore possible, at any time, to extrapolate the cross-sectional relationship to a zero risk level, and thus to determine...

Theoretically, corporate debt is economically equivalent to safe debt minus a put option on the firm’s assets. We empirically show that indeed portfolios of long Treasuries and short traded put options (“pseudo bonds”) closely match the properties of traded corporate bonds. Pseudo bonds...

This paper attempts to assess the economic significance and implications of collateralization in different financial markets, which is essentially a matter of theoretical justification and empirical verification. We present a comprehensive theoretical framework that allows for collateralization...

Article aims to demonstrate the significant impact of dynamics of the relationship between financial intermediaries on the level of market volatility. Particularly important are the growing share of the links between hedge funds and other financial institutions. In order to demonstrate the...

The Islamic bonds or sukuk market is one of the fastest growing segments of the nearly US$2trillion global Islamic finance industry. However, lack of trading in secondary sukuk markets is a peculiar feature in this sector and both institutional and retail sukuk investors are known to adopt a...