This paper describes a method for computing risk-neutral density functions based on the option-implied volatility smile. Its aim is to reduce complexity and provide cookbook-style guidance through the estimation process. The technique is robust and avoids violations of option no-arbitrage...

This paper has two objectives. Initially, seeks to review the main theses contained in the Brazilian economic literature on the role of the Brazilian Development Bank (BNDES) and its historical role in financing Brazilian economic development. The second objective is to analyze the perspective...

This study investigates how well weekly Google search volumes track and predict bank failures in the United States between 2007 and 2012, contributing to the expanding literature that exploits internet data for the prediction of events. Different duration models with time-varying covariates are...

We use a compound option-based structural credit risk model to infer a term structure of banking crisis risk from market data on bank stocks in daily frequency. Considering debt service payments with different maturities this term structure assigns a separate estimator for short- and long-term...

This paper describes a set of indicators of systemic risk computed from current market prices of equity and equity index options. It displays results from a prototype version, computed daily from January 2006 to January 2013. The indicators represent a systemic risk event as the realization of...

This paper proposes a systemic risk index based on Functional Data Analysis (FDA), overcoming salient shortcomings of standard methodologies related to data usage, data sparseness, and high dimensionality issues. Using Mexican data, a set of systemic risk indexes are constructed and we show that...

Commodity derivatives were introduced in India with a dual purpose of promoting price discovery and enhancing risk management in the commodities market. A transaction tax (of 0.01 per cent) on commodity futures trading was introduced in the Union Budget 2013-14. This study examines the rationale...

Security Transaction Tax (STT) was introduced in the Indian capital market in 2004. It is a tax on transaction of equities as well as their derivatives. Despite the reduction in STT over the years, it constitutes a large percentage (next only to brokerage fee) of the total cost of trading. The...

In 2012, JPMorgan accumulated a USD 6.2 billion loss on a credit derivatives portfolio, the so-called "London Whale", partly as a consequence of de-correlations of non-perfectly correlated positions that were supposed to hedge each other. Motivated by this case, we devise a factor model for...

The way in which climate policy and climate risks are currently accounted for in financial and real investment decisions is inadequate. The paper demonstrates weaknesses in methods presently used and proposes an alternative that aims to bridge the duration gap between climate policy modeling and...