The current subprime crisis has prompted us to look again into the nature of risk at the tail of the distribution. In particular, we investigate the risk contribution of an asset, which has infrequent but huge losses, to a portfolio using two risk measures, namely Value-at-Risk (VaR) and...

We analyse the well-known TORQ dataset of trades on the NYSE over a 3-month period, breaking down transactions depending on whether the active or passive side was institutional or private. This allows us to compare the returns on the different trade categories. We find that, however we analyse...

The current subprime crisis has prompted us to look again into the nature of risk at the tail of the distribution. In particular, we investigate the risk contribution of an asset, which has infrequent but huge losses, to a portfolio using two risk measures, namely Value-at-Risk (VaR) and...

Let e and Sigma be respectively the vector of shocks and its variance covariance matrix in a linear system of equations in reduced form. This article shows that a unique orthogonal variance decomposition can be obtained if we impose a restriction that maximizes the trace of A, a positive...

We use transactions data to explore the magnet effects of price limit rules on the Shanghai Stock Exchange (SHSE). When limit hits are imminent, stock prices are found to approach the price limits at faster rates, with higher trading intensity and larger price variation, supporting the magnet...

This paper uses a dynamic model of orders and stock prices, to assess the informativeness of order flows of individuals and institutions. Our unique transactions, orders and quotes dataset on the highly liquid order driven Taipei Stock Exchange, specifies the identity of traders, for limit and...

Using transactions data, we find significant magnet effects of price limit rules in Taiwan Stock Exchange (TSEC). Consistent with Subrahmanyam (1994), we find that when limit hits are imminent, trading activities intensify with higher volumes and volatility. More importantly, our transactions...

We show that the probability of information-based trade (PIN) played a significant role in explaining monthly returns on Shanghai A shares over the period 2001 to 2006. In particular, PIN, as approximated by order imbalance as a proportion of total transactions, appears to explain returns even...

This paper uses saddlepoint technique to backtest the trading risk of commercial banks using expected shortfall. It is found that four out of six US commercial banks have excessive trading risks. Monte Carlo simulation studies show that the proposed backtest is very accurate and powerful even...