Download or read book The Leverage Effect in Financial Markets written by Jean-Philippe Bouchaud and published by . This book was released on 2001 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days, while for stock indices, it is much stronger but decays faster. For individual stocks, the magnitude of this correlation has a universal value that can be rationalized in terms of a new 'retarded' model which interpolates between a purely additive and a purely multiplicative stochastic process. For stock indices a specific market panic phenomenon seems to be necessary to account for the observed amplitude of the effect.

Download or read book The Handbook of Hybrid Securities written by Jan De Spiegeleer and published by John Wiley & Sons. This book was released on 2014-05-19 with total page 421 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introducing a revolutionary new quantitative approach to hybrid securities valuation and risk management To an equity trader they are shares. For the trader at the fixed income desk, they are bonds (after all, they pay coupons, so what's the problem?). They are hybrid securities. Neither equity nor debt, they possess characteristics of both, and carry unique risks that cannot be ignored, but are often woefully misunderstood. The first and only book of its kind, The Handbook of Hybrid Securities dispels the many myths and misconceptions about hybrid securities and arms you with a quantitative, practical approach to dealing with them from a valuation and risk management point of view. Describes a unique, quantitative approach to hybrid valuation and risk management that uses new structural and multi-factor models Provides strategies for the full range of hybrid asset classes, including convertible bonds, preferreds, trust preferreds, contingent convertibles, bonds labeled "additional Tier 1," and more Offers an expert review of current regulatory climate regarding hybrids, globally, and explores likely political developments and their potential impact on the hybrid market The most up-to-date, in-depth book on the subject, this is a valuable working resource for traders, analysts and risk managers, and a indispensable reference for regulators

Download or read book Financial Leverage Does Not Cause the Leverage Effect written by Abdullah C. Aydemir and published by . This book was released on 2006 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We quantify the effect of financial leverage on stock return volatility in a dynamic general equilibrium economy with debt and equity claims. We study the effects of financial leverage on the market portfolio, and on a small firm with idiosyncratic and market risk. In an economy with both a constant interest rate and constant price of risk, financial leverage generates little variation in stock return volatility at the market level but significant variation at the individual firm level. In an economy with more realistic variation in interest rates and the price of risk, there is significant variation in stock return volatility at the market and firm level. In such an economy, financial leverage has little effect on the dynamics of stock return volatility at the market level. Financial leverage contributes more to the dynamics of stock return volatility for a small firm.

Download or read book Leveraged Financial Markets A Comprehensive Guide to Loans Bonds and Other High Yield Instruments written by William Maxwell and published by McGraw Hill Professional. This book was released on 2010-08-27 with total page 433 pages. Available in PDF, EPUB and Kindle. Book excerpt: The high-yield debt market (junk bonds) is a major sector of the financial industry, with more than $600 billion traded annually, and interest in the market is on the rise Features the insights of Marty Fridson (Fridson Vision), Sam DeRosa (CSFB High-Yield), Peter Tufano (Harvard University), and Darrell Duffie (Stanford University), among others Includes models for analyzing probabilities of default and recovery

Download or read book Guide to Financial Markets written by Marc Levinson and published by The Economist. This book was released on 2018-07-24 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: The revised and updated 7th edition of this highly regarded book brings the reader right up to speed with the latest financial market developments, and provides a clear and incisive guide to a complex world that even those who work in it often find hard to understand. In chapters on the markets that deal with money, foreign exchange, equities, bonds, commodities, financial futures, options and other derivatives, the book examines why these markets exist, how they work, and who trades in them, and gives a run-down of the factors that affect prices and rates. Business history is littered with disasters that occurred because people involved their firms with financial instruments they didn't properly understand. If they had had this book they might have avoided their mistakes. For anyone wishing to understand financial markets, there is no better guide.

Download or read book Derivatives in Financial Markets with Stochastic Volatility written by Jean-Pierre Fouque and published by Cambridge University Press. This book was released on 2000-07-03 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book, first published in 2000, addresses pricing and hedging derivative securities in uncertain and changing market volatility.

Download or read book Adaptive Markets written by Andrew W. Lo and published by Princeton University Press. This book was released on 2019-05-14 with total page 503 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new, evolutionary explanation of markets and investor behavior Half of all Americans have money in the stock market, yet economists can’t agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists believe. The debate is one of the biggest in economics, and the value or futility of investment management and financial regulation hangs on the answer. In this groundbreaking book, Andrew Lo transforms the debate with a powerful new framework in which rationality and irrationality coexist—the Adaptive Markets Hypothesis. Drawing on psychology, evolutionary biology, neuroscience, artificial intelligence, and other fields, Adaptive Markets shows that the theory of market efficiency is incomplete. When markets are unstable, investors react instinctively, creating inefficiencies for others to exploit. Lo’s new paradigm explains how financial evolution shapes behavior and markets at the speed of thought—a fact revealed by swings between stability and crisis, profit and loss, and innovation and regulation. An ambitious new answer to fundamental questions about economics and investing, Adaptive Markets is essential reading for anyone who wants to understand how markets really work.

Download or read book Leveraged Finance written by Stephen J. Antczak and published by John Wiley & Sons. This book was released on 2009-06-10 with total page 371 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timely guide to today’s high-yield corporate debt markets Leveraged Finance is a comprehensive guide to the instruments and markets that finance much of corporate America. Presented in five sections, this experienced author team covers topics ranging from the basics of bonds and loans to more advanced topics such as valuing CDs, default correlations among CLOs, and hedging strategies across corporate capital structures. Additional topics covered include basic corporate credit, relative value analysis, and various trading strategies used by investors, such as hedging credit risk with the equity derivatives of a different company. Stephen Antczak, Douglas Lucas, and Frank Fabozzi present readers with real-market examples of how investors can identify investment opportunities and how to express their views on the market or specific companies through trading strategies, and examine various underlying assets including loans, corporate bonds, and much more. They also offer readers an overview of synthetic and structured products such as CDS, LCDS, CDX, LCDX, and CLOs. Leveraged Finance has the information you need to succeed in this evolving financial arena.

Download or read book The Leverage Effect on Financial Performance A Review of Empirical Evidence written by John Joseph and published by GRIN Verlag. This book was released on 2018-06-22 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2018 in the subject Business economics - Business Management, Corporate Governance, , language: English, abstract: The International Financial Reporting Standards (IFRS) is a high quality and principle based reporting standards that remove many accounting alternatives. It is therefore, consequently expected to limit the management’s discretion and lessen practices on earnings management. Quite the opposite, some researchers argue that the flexibility in IFRS and its fair value pre-eminence might afford greater opportunities for firms to manage earnings. It is this inaptness which incited and aggravated the conduct of this study. This study applies a desktop review to investigate the worldwide existing empirical research evidence on the effect of IFRS on earnings management post- IFRS adoption and in relation to other reporting standards and reports whether the results are indistinguishable between developed and developing economies. Accounting research in developed economies has long identified earnings management as a means by which managers manipulate financial reports to mislead other stakeholders on the underlying economic performance of the firm. However, earnings management research did not receive much attention in developing countries such as Nigeria until recently. The findings reveal that the existing empirical crams and conclusions there on are mixed, inconsistent and difficult to generalise. This indicates the pressing need for country, especially Nigeria to engage on studies of this nature. The study further, stumbles on the fact that IFRS can indistinctly benefit both developing and developed markets when coupled with appropriate effective enforcement machinery. Substantially, the results entail that IFRS is a critical determinant for quality reporting but not a ‘prima facie’ guarantor for quality reporting.

Download or read book Corporate Capital Structures in the United States written by Benjamin M. Friedman and published by University of Chicago Press. This book was released on 2009-05-15 with total page 404 pages. Available in PDF, EPUB and Kindle. Book excerpt: The research reported in this volume represents the second stage of a wide-ranging National Bureau of Economic Research effort to investigate "The Changing Role of Debt and Equity in Financing U.S. Capital Formation." The first group of studies sponsored under this project, which have been published individually and summarized in a 1982 volume bearing the same title (Friedman 1982), addressed several key issues relevant to corporate sector behavior along with such other aspects of the evolving financial underpinnings of U.S. capital formation as household saving incentives, international capital flows, and government debt management. In the project's second series of studies, presented at the National Bureau of Economic Research conference in January 1983 and published here for the first time along with commentaries from that conference, the central focus is the financial side of capital formation undertaken by the U.S. corporate business sector. At the same time, because corporations' securities must be held, a parallel focus is on the behavior of the markets that price these claims.

Download or read book Leverage Effect Volatility Feedback and Self Exciting Market Disruptions written by Peter Carr and published by . This book was released on 2017 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Samp;P 500 index return interacts negatively with its volatility. This paper traces the negative interaction to three distinct economic channels and proposes to disentangle the relative contribution of each channel using Samp;P 500 index options. First, equity volatility increases proportionally with the level of financial leverage, the variation of which is dictated by managerial decisions on a company's capital structure based on economic conditions. Second, irrespective of financial leverage, a positive shock to business risk increases the cost of capital and reduces the valuation of future cash flows, generating an instantaneous negative correlation between asset returns and asset volatility. Finally, large, negative market disruptions often generate self-exciting behaviors. The occurrence of one negative disruption induces more disruptions to follow, thus raising market volatility. Model estimation highlights the information in the large cross-section of equity index options in identifying the economic channels underlying the variations of the equity index and its volatility.

Download or read book Portfolio Selection written by Harry Markowitz and published by Yale University Press. This book was released on 2008-10-01 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: Embracing finance, economics, operations research, and computers, this book applies modern techniques of analysis and computation to find combinations of securities that best meet the needs of private or institutional investors.

Download or read book Managing Derivative Risks written by Lillian Chew and published by Wiley. This book was released on 1996-07-24 with total page 332 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managing Derivative Risks The Use and Abuse of Leverage Lillian Chew When Barings, the oldest merchant bank in the United Kingdom, collapsed it joined the long list of financial disasters that have involved derivatives. Procter & Gamble, Metallgesellschaft and Orange County have all fallen famously foul of these instruments. But are they really so dangerous? Promoters of derivatives rightly argue that they provide a service, helping to manage risk in increasingly volatile markets. Where large losses have occurred, it is because derivatives have been misused through greed, a lack of understanding of their risks and the failure of management to control properly those who deal in them, or all three. This book cuts through the hysteria and hype and explains in non-technical terms the unique risks of derivatives. These risks are discussed using actual examples, particularly the high-profile cases of the early 1990s. Managing Derivative Risks also discusses topical issues such as Value at Risk and the latest Bank for International Settlements’ capital requirements for market risk. It will prove a valuable source of information for finance directors, treasurers, institutional investors, fund managers, bankers, regulators, and anyone who sits on a corporate board.

Download or read book Geopolitical Risk on Stock Returns Evidence from Inter Korea Geopolitics written by Seungho Jung and published by International Monetary Fund. This book was released on 2021-10-22 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how corporate stock returns respond to geopolitical risk in the case of South Korea, which has experienced large and unpredictable geopolitical swings that originate from North Korea. To do so, a monthly index of geopolitical risk from North Korea (the GPRNK index) is constructed using automated keyword searches in South Korean media. The GPRNK index, designed to capture both upside and downside risk, corroborates that geopolitical risk sharply increases with the occurrence of nuclear tests, missile launches, or military confrontations, and decreases significantly around the times of summit meetings or multilateral talks. Using firm-level data, we find that heightened geopolitical risk reduces stock returns, and that the reductions in stock returns are greater especially for large firms, firms with a higher share of domestic investors, and for firms with a higher ratio of fixed assets to total assets. These results suggest that international portfolio diversification and investment irreversibility are important channels through which geopolitical risk affects stock returns.

Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.

Download or read book Measuring off Balance Sheet Leverage written by Mr.Peter Breuer and published by International Monetary Fund. This book was released on 2000-12-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The simultaneous unwinding of leveraged positions can trigger financial market turbulence. Although balance-sheet measures of leverage are available, it is useful to construct a measure of leverage that incorporates both on- and off-balance-sheet activities. This paper provides measures of leverage implicit in derivative contracts by decomposing the contracts into cash market equivalent components. A leverage ratio can then be calculated for this replicating portfolio, which consists of own funds (equity) and borrowed funds equivalents (debt). Methods for aggregating leverage by institution and by markets are presented. The interaction between leverage and risk is discussed, and a modified capital adequacy ratio is calculated, which captures off-balance-sheet exposure.

Download or read book The Effect of Leverage on Asset Sales Between Financial Institutions written by Mr.Sonali Das and published by International Monetary Fund. This book was released on 2017-09-08 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes how the leverage of financial institutions affects their demand for assets and the resulting value of transactions between financial institutions. The results show a positive relationship between buyer capital and the likelihood of buying assets, and between buyer capital and the value of the deal. That is, those institutions that are the least constrained in their ability to raise funding are those that demand assets and pay more for them. This result does not hold, however, for deposit-taking institutions that had access to several government programs designed to improve their liquidity position during the crisis of 2008.