This paper re-examines the issues of persistence and mean reversion in UK stock returns in the light of new developments published in Chow and Denning (1993). The random walk hypothesis is tested using multiple variance ratios for returns on the Financial Times All Share Index and 330 individual...

This paper presents and tests a model of the volatility of individual company stocks derived from option prices. The data comes from 63 traded options quoted on the London International Financial Futures Exchange. The model relates volatilities to earnings announcement dates, interest rate...

This paper is the first to examine liquidity in 37 stock markets around the world. We find volatility to be a very important driving factor for market illiquidity. A highly volatile market leads to a illiquid financial market. Stock market illiquidity condition also tends to persist. Using a...

Forbes and Rigobon (2002) claim there was no contagion among international stock markets during the 1997 Asian crisis, with contagion being defined as an increase in dependence. We revisit this issue using a more robust methodology based on copula. After controlling for heteroskedasticity with...

GDP linked bonds have their cashflows linked to a country's national output. We present a model of sovereign default that tracks the sovereign's capacity to pay through the real exchange rate and potential output. By calibrating to a vanilla bond, our model produces default profiles and prices...

Financial market volatility is an important input for investment, option pricing and financial market regulation. In this review article, we compare the volatility forecasting findings in 93 papers published and written in the last two decades. This article is written for general readers in...

The long memory characteristic of financial market volatility is well documented and has important implications for volatility forecasting and option pricing. When fitted to the same data, different volatility models calculate the unconditional variance differently and could have very different...

This paper develops a closed form risk-neutral valuation model for pricing European style options when the underlying has a mixture of transformed-normal distributions. Specifically, we introduce the mixture of g distributions, which contains the mixture of normal and lognormal distributions as...

The study determines if information extracted from a big data set that includes limit order book (LOB) and Dow Jones corporate news can help to improve realised volatility forecasting for 23 NASDAQ tickers over the sample from 28 June 2007 to 17 November 2016. The out-of-sample forecasting...

Credit default swaps (CDSs) and deep out-of-the-money put (DOOMP) options can both be used as a credit protection instrument. However, partial market segmentation results in deviations between firm hazard rates implied by these contracts. These deviations are driven by a systematic...