We examine how euro conversion affected trading costs and volume in European equity markets. Euro conversion immediately changed tick sizes and price transparency, both of which could affect trading costs and relative trading volume. Longer-run, conversion could boost competition among...

This paper proposes a new mutual exciting regime-switching model where crises can spread contagiously across countries. Each country has its own hidden stochastic process that determines whether it is in a normal or crisis regime. The mutual-excitation component allows interactions in the Markov...

John Maynard Keynes war ein Ökonom, der stets zwischen der Welt der Theorien und der Realität pendelte, er prüfte und verwarf theoretische Annahmen aufgrund seiner Beobachtungen, die er wiederum als Ausgangspunkte für die Entwicklung neuer Theorien nutzte. Gleichzeitig betrieb er als...

In this primer, we review the classical methods for assessing the performance of a financial portfolio. The analysis relies on benchmarking the return on the portfolio with that of a peer group. We define and discuss the pros and cons of four performance metrics that are theoretically consistent...

This essay seeks to rehabilitate the capital asset pricing model by splitting beta, the basic unit of systematic risk, into subatomic (or “baryonic”) components. By analogy to quantum chromodynamics and other aspects of the Standard Model of particle physics, this essay bifurcates beta on...

This study explores whether conditional correlations between precious metals and stock markets impact upon expected returns on precious metals. The empirical evidence presents that there is no significant trade–off between conditional correlations and expected returns. This study reveals that...

Stochastic processes is one of the key operations research tools for analysis of complex phenomenon. This paper has a unique application to the study of mean changing models in stock markets. The idea is to enter and exit stock markets like Apple Computer and the broad S&P500 index at good times...

The duration of a bond approximately measures the interest rate risk caused by parallel shifts of the yield curve. This paper uses a generalization of the duration suggested by Diebold et al. (2006a), that takes the variations of the level, the slope and the curvature of the yield curve into...

This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPV-consistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it...

Financial analyses such as valuation, solvency and capital adequacy play a crucial role in bankruptcy. Over the course of the 20th century, methods of financial analysis in bankruptcy have shifted from earnings multiples to discounted cash flow (DCF) and recently to market-based approaches such...