The relationship between order imbalance, market returns and macroeconomic news is examined in the context of the Australian interest rate futures market. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive...

We re-examine the market efficiency of commodity futures using a new approach that accounts for both time-varying risk premium and conditional heteroscedasticity of spot prices. The conventional market efficiency tests so far in the literature are based on either risk neutral or constant risk...

We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be performed efficiently through the FFT...

The sovereign debt crisis challenged investors in European government bonds to deal with volatile interest rate spreads. For managing sovereign risk, “Eurex” introduced futures contracts on Italian government bonds reflecting risks of lower rated countries. We analyze hedging strategies for...

This paper quantifies and explains valuation differences between credit default swaps and corporate bonds from a sample of European investment-grade firms. Based on all information gained through the calibration of a stochastic intensity credit model to the time series of the issuer's CDS curve,...

This paper investigates the short-run forecasting performance, in the relatively new and fairly unresearched futures market of Greece. Forecasts from univariate (ARIMA) and multivariate (VAR, VECM and SURE-VECM) linear time-series models indicate that cash returns can be more accurately...

This paper examines the futures market contract constellation for Kyoto Phase II carbon financial instruments (CFI's) as traded on the European Climate Exchange; the most sophisticated and liquid carbon exchange in the EU. The five December maturing futures contracts considered are officially...

This note presents a measure of the effective protection rate in a general equilibrium model under uncertainty where a stock market exists and international trade in securities takes place. Real equity prices replace the final commodity prices since, in the presence of uncertainty, resource...

Using CFTC's COT data, both GARCH and PARCH volatility based models found the lagged volatility and news about volatility from the previous month to be significant in explaining large hedgers' and speculators' volatility. The greater reliance on the ARCH term for speculators' suggested their...

It is well-documented that financial markets become more integrated during turmoil periods. In addition, the recent global financial crisis has led to an in depth analysis and discussion of the pros and cons of derivative instruments, particularly credit default swaps, which are considered as...