This paper introduces a pricing relation for digital currencies as globally priced assets in competitive markets. Using the pricing relation, the study finds that the U.S. dollar price changes of Bitcoin, unlike other globally traded assets such as commodities and fiat currencies, are slightly negatively correlated with the U.S. dollar price changes of a basket of G10 currencies. It also documents Bitcoin price disparities and discrepancies for various pairs of denominated currencies, namely the U.S. dollar, Euro, British pound, Japanese yen, Canadian dollar, Chinese yuan, and Polish zloty. The Bitcoin price discrepancies are 25% higher than Bitcoin price disparities. Finally, this study examines the theoretical price and volatility of cryptocurrencies with zero fundamental values and finds that they have low price volatility. Consequently, they are much easier to regulate, use, and hold.
{"title":"The Price of a Digital Currency","authors":"A. Aloosh","doi":"10.2139/ssrn.3047982","DOIUrl":"https://doi.org/10.2139/ssrn.3047982","url":null,"abstract":"This paper introduces a pricing relation for digital currencies as globally priced assets in competitive markets. Using the pricing relation, the study finds that the U.S. dollar price changes of Bitcoin, unlike other globally traded assets such as commodities and fiat currencies, are slightly negatively correlated with the U.S. dollar price changes of a basket of G10 currencies. It also documents Bitcoin price disparities and discrepancies for various pairs of denominated currencies, namely the U.S. dollar, Euro, British pound, Japanese yen, Canadian dollar, Chinese yuan, and Polish zloty. The Bitcoin price discrepancies are 25% higher than Bitcoin price disparities. Finally, this study examines the theoretical price and volatility of cryptocurrencies with zero fundamental values and finds that they have low price volatility. Consequently, they are much easier to regulate, use, and hold.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"85 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132106705","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2017-12-18DOI: 10.21511/IMFI.14(4).2017.08
Ibnu Qizam
This research is aimed at analyzing the causality puzzle on the correlation between financial leverage and systematic risk (beta). Financial leverage and beta are usually considered as two proxies of risk derived from different domains: one ends at financial decision outcome, and the other points to market. Cross-sectionally, this result does not support the moderating-variable impact of size on the relation between financial leverage and systematic risk. On the other hand, however, the moderating-variable impact of industry and operating leverage (to some extent) on the relation between financial leverage and systematic risk were well documented. Inter-temporally, financial leverage is significantly and symmetrically related to beta, not moderated by size and operating leverage. This means that the two variables show bidirectional causality. This study contributes to the new insight that financial leverage and beta are the two variables with bidirectional causality, showing that in the long run, risks from fundamental (financial/micro-economy) and from market (macro-economy) are tightly linked to each other inter-temporally.
{"title":"On the Causality Analysis of the Correlation Between Financial Leverage and Systematic Risk: Evidence From Indonesian Stock Exchange","authors":"Ibnu Qizam","doi":"10.21511/IMFI.14(4).2017.08","DOIUrl":"https://doi.org/10.21511/IMFI.14(4).2017.08","url":null,"abstract":"This research is aimed at analyzing the causality puzzle on the correlation between financial leverage and systematic risk (beta). Financial leverage and beta are usually considered as two proxies of risk derived from different domains: one ends at financial decision outcome, and the other points to market. Cross-sectionally, this result does not support the moderating-variable impact of size on the relation between financial leverage and systematic risk. On the other hand, however, the moderating-variable impact of industry and operating leverage (to some extent) on the relation between financial leverage and systematic risk were well documented. Inter-temporally, financial leverage is significantly and symmetrically related to beta, not moderated by size and operating leverage. This means that the two variables show bidirectional causality. This study contributes to the new insight that financial leverage and beta are the two variables with bidirectional causality, showing that in the long run, risks from fundamental (financial/micro-economy) and from market (macro-economy) are tightly linked to each other inter-temporally.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132067465","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The environment and programming language R is reviewed and its capabilities, attractiveness and limitations are assessed, with reference to its continuing potential use and application finance, management information and decision sciences. A brief review of the top packages and programmers reveals further information about the relative strengths and weaknesses of R. Its adoption by major technology companies such as Microsoft and their augmentation of the core R library seems likely to further promote its future growth and popularity.
{"title":"Practical Aspects of R in Finance, Management Information, and Decision Sciences","authors":"D. Allen","doi":"10.2139/ssrn.3085054","DOIUrl":"https://doi.org/10.2139/ssrn.3085054","url":null,"abstract":"The environment and programming language R is reviewed and its capabilities, attractiveness and limitations are assessed, with reference to its continuing potential use and application finance, management information and decision sciences. A brief review of the top packages and programmers reveals further information about the relative strengths and weaknesses of R. Its adoption by major technology companies such as Microsoft and their augmentation of the core R library seems likely to further promote its future growth and popularity.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115676994","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper contributes a generic probabilistic method to derive explicit exact probability densities for stochastic volatility models. Our method is based on a novel application of the exponential measure change in [Z. Palmowski & T. Rolski (2002) A technique for exponential change of measure for Markov processes, Bernoulli 8(6), 767–785]. With this generic approach, we first derive explicit probability densities in terms of model parameters for several stochastic volatility models with nonzero correlations, namely the Heston 1993, 3/2, and a special case of the α-Hypergeometric stochastic volatility models recently proposed by [J. Da Fonseca & C. Martini (2016) The α-Hypergeometric stochastic volatility model, Stochastic Processes and their Applications 126(5), 1472–1502]. Then, we combine our method with a stochastic time change technique to develop explicit formulae for prices of timer options in the Heston model, the 3/2 model and a special case of the α-Hypergeometric model.
本文提出了一种通用的概率方法来推导随机波动模型的显式精确概率密度。我们的方法是基于指数测量变化在[Z]的新应用。Palmowski & T. Rolski(2002)马尔可夫过程测度的指数变化技术，Bernoulli 8(6)， 767-785。利用这种通用方法，我们首先推导了几种非零相关随机波动模型的显式概率密度，即Heston 1993, 3/2和最近由[J]提出的α-超几何随机波动模型的一个特例。Da Fonseca, C. Martini (2016) α-超几何随机波动模型，随机过程及其应用[j]. vol . 11(5)， 1472-1502。然后，我们将该方法与随机时间变化技术相结合，建立了赫斯顿模型、3/2模型和α-超几何模型的一种特殊情况下的计时器期权价格的显式公式。
{"title":"Integral Representation of Probability Density of Stochastic Volatility Models and Timer Options","authors":"Zhenyu Cui, J. Kirkby, G. Lian, D. Nguyen","doi":"10.2139/ssrn.3082349","DOIUrl":"https://doi.org/10.2139/ssrn.3082349","url":null,"abstract":"This paper contributes a generic probabilistic method to derive explicit exact probability densities for stochastic volatility models. Our method is based on a novel application of the exponential measure change in [Z. Palmowski & T. Rolski (2002) A technique for exponential change of measure for Markov processes, Bernoulli 8(6), 767–785]. With this generic approach, we first derive explicit probability densities in terms of model parameters for several stochastic volatility models with nonzero correlations, namely the Heston 1993, 3/2, and a special case of the α-Hypergeometric stochastic volatility models recently proposed by [J. Da Fonseca & C. Martini (2016) The α-Hypergeometric stochastic volatility model, Stochastic Processes and their Applications 126(5), 1472–1502]. Then, we combine our method with a stochastic time change technique to develop explicit formulae for prices of timer options in the Heston model, the 3/2 model and a special case of the α-Hypergeometric model.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115800065","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Services known as Cryptocurrency “Tumblers” obfuscate the provenance, possession, and movement of cryptocurrencies through a process of “mixing” . While this speaks to the cryptoanarchist philosophical roots of cryptocurrencies, it poses various forms of risks, particularly those subsumed by the anti-money laundering (AML) category. This discussion paper examines that dichotomy, between cryptoanarchism and oversight, through the Tumbler lens, so as to consider the regulation, oversight, and legality of Tumblers themselves.
{"title":"The Cryptocurrency Tumblers: Risks, Legality and Oversight","authors":"Usman W. Chohan","doi":"10.2139/SSRN.3080361","DOIUrl":"https://doi.org/10.2139/SSRN.3080361","url":null,"abstract":"Services known as Cryptocurrency “Tumblers” obfuscate the provenance, possession, and movement of cryptocurrencies through a process of “mixing” . While this speaks to the cryptoanarchist philosophical roots of cryptocurrencies, it poses various forms of risks, particularly those subsumed by the anti-money laundering (AML) category. This discussion paper examines that dichotomy, between cryptoanarchism and oversight, through the Tumbler lens, so as to consider the regulation, oversight, and legality of Tumblers themselves.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114620703","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
For the last decade economists have been preoccupied with the decline in bank financing to small businesses and entrepreneurs. This effort has produced a better understanding of the obstacles to external financing. We examine the market and policy instruments that in some sense encourage more bank lending to SMEs. This leads us to explore the recent surge in Fintech lending that has affected the ability of SMEs and entrepreneurial firms to obtain loans. We consider recent evidence that the growth of alternative online lending has supplied new competition to traditional banks and is beginning to disrupt the traditional of business of lending. Finally, we examine the regulatory responses to Fintech in seventeen jurisdictions. We examine the first time that venture capitalists invest in Fintech companies to determine whether there is a meaningful connection between levels of investment and regulatory choice. Our findings have implications for how regulation is likely to play an important role in the development of Fintech.
{"title":"Fintech and the Financing of Entrepreneurs: From Crowdfunding to Marketplace Lending","authors":"M. Fenwick, J. McCahery, E. Vermeulen","doi":"10.2139/ssrn.2967891","DOIUrl":"https://doi.org/10.2139/ssrn.2967891","url":null,"abstract":"For the last decade economists have been preoccupied with the decline in bank financing to small businesses and entrepreneurs. This effort has produced a better understanding of the obstacles to external financing. We examine the market and policy instruments that in some sense encourage more bank lending to SMEs. This leads us to explore the recent surge in Fintech lending that has affected the ability of SMEs and entrepreneurial firms to obtain loans. We consider recent evidence that the growth of alternative online lending has supplied new competition to traditional banks and is beginning to disrupt the traditional of business of lending. Finally, we examine the regulatory responses to Fintech in seventeen jurisdictions. We examine the first time that venture capitalists invest in Fintech companies to determine whether there is a meaningful connection between levels of investment and regulatory choice. Our findings have implications for how regulation is likely to play an important role in the development of Fintech.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133518062","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the extent to which a country’s degree of genetic variation contributes to the observed variation in financial market activity across countries. We postulate that genetic variation can affect financial markets through its impact on aggregate investment behavior, innovation in the financial sector, and productivity. Our country-level, cross-sectional analysis reveals a significant hump-shaped relation between a country’s predicted genetic variation and the size of its financial markets. This result is consistent with the conjecture that at relatively intermediate degrees of genetic variation, the associated intermediate levels of trust and risk-taking within the country result in the largest investment flows into public financial markets. Our results are robust to different measres of financial market size, several regression specifications, and the inclusion of a broad range of controls such as legal origin, institutional characteristics, culture, natural endowment, and trade openness. Our main findings appear to be restricted specifically to equity markets (vs. debt markets) where there is relatively more uncertainty and, thus, trust and risk-taking are relatively more important. Additional analysis suggests that better overall country-level governance can moderate the role that genetic variation plays in shaping equity market size.
{"title":"Financial Markets and Genetic Variation","authors":"E. Cardella, Ivalina Kalcheva, Danjue Shang","doi":"10.2139/ssrn.2409500","DOIUrl":"https://doi.org/10.2139/ssrn.2409500","url":null,"abstract":"We investigate the extent to which a country’s degree of genetic variation contributes to the observed variation in financial market activity across countries. We postulate that genetic variation can affect financial markets through its impact on aggregate investment behavior, innovation in the financial sector, and productivity. Our country-level, cross-sectional analysis reveals a significant hump-shaped relation between a country’s predicted genetic variation and the size of its financial markets. This result is consistent with the conjecture that at relatively intermediate degrees of genetic variation, the associated intermediate levels of trust and risk-taking within the country result in the largest investment flows into public financial markets. Our results are robust to different measres of financial market size, several regression specifications, and the inclusion of a broad range of controls such as legal origin, institutional characteristics, culture, natural endowment, and trade openness. Our main findings appear to be restricted specifically to equity markets (vs. debt markets) where there is relatively more uncertainty and, thus, trust and risk-taking are relatively more important. Additional analysis suggests that better overall country-level governance can moderate the role that genetic variation plays in shaping equity market size.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126816814","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Guaranteed off-balance sheet (consists of banker's acceptance, letter of credit and letter of guarantee), is an essential part of China's shadow banking, but neglected by current research because no data available. This paper fills the research gap, by investigate the mechanism behinds its cyclical behavior through a novel dataset. Different from developed economies, guaranteed OBS in China has long-run substitute relation with commercial loan. Therefore, any policy impacts on commercial loan growth will has a converse effect on guaranteed OBS growth indirectly. Furthermore, contrary to existing research about China's shadow banking, we find the Desirability lending policy conducted by People's Bank of China during 2011–2014 is the unique fundamental driving force, rather than traditional regulatory constraints, such as reserve requirement ratio and loan-to-deposit ratio. It's an example of macroprudential policy induces shadow banking activity. Moreover, guaranteed OBS growth is also influenced by macroeconomy, risk and return factors of itself, operation efficiency and creditworthiness of the bank. Hence empirical results of this paper could also be viewed as the first time to test OBS development theories with China's data.
{"title":"Neglected Part of Shadow Banking in China","authors":"P. An","doi":"10.2139/ssrn.2884187","DOIUrl":"https://doi.org/10.2139/ssrn.2884187","url":null,"abstract":"Abstract Guaranteed off-balance sheet (consists of banker's acceptance, letter of credit and letter of guarantee), is an essential part of China's shadow banking, but neglected by current research because no data available. This paper fills the research gap, by investigate the mechanism behinds its cyclical behavior through a novel dataset. Different from developed economies, guaranteed OBS in China has long-run substitute relation with commercial loan. Therefore, any policy impacts on commercial loan growth will has a converse effect on guaranteed OBS growth indirectly. Furthermore, contrary to existing research about China's shadow banking, we find the Desirability lending policy conducted by People's Bank of China during 2011–2014 is the unique fundamental driving force, rather than traditional regulatory constraints, such as reserve requirement ratio and loan-to-deposit ratio. It's an example of macroprudential policy induces shadow banking activity. Moreover, guaranteed OBS growth is also influenced by macroeconomy, risk and return factors of itself, operation efficiency and creditworthiness of the bank. Hence empirical results of this paper could also be viewed as the first time to test OBS development theories with China's data.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"178 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121084620","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Cryptocurrencies are an area of heightened pecuniary, numismatic, technological, and investment interest, and yet a comprehensive understanding of their theories and foundations is still left wanting among many practitioners and stakeholders. This discussion paper synthesizes and summarizes the salient literature on cryptocurrencies with a view to advancing a more general understanding of their order and purpose.
{"title":"Cryptocurrencies: A Brief Thematic Review","authors":"Usman W. Chohan","doi":"10.2139/ssrn.3024330","DOIUrl":"https://doi.org/10.2139/ssrn.3024330","url":null,"abstract":"Cryptocurrencies are an area of heightened pecuniary, numismatic, technological, and investment interest, and yet a comprehensive understanding of their theories and foundations is still left wanting among many practitioners and stakeholders. This discussion paper synthesizes and summarizes the salient literature on cryptocurrencies with a view to advancing a more general understanding of their order and purpose.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115284052","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
As the fourth largest economy over the world, Germany’s financial sector plays a key role in the global economy. As one of the most important components of the financial sector, the equity market played a more and more important role. Thus, risk management of its stock market is crucial for welfare of its market participants. To account for the two stylized facts, volatility clustering and conditional heavy tails, we take advantage of the framework in Guo (2017a) and consider empirical performance of the GARCH model with normal reciprocal inverse Gaussian distribution in fitting the German stock return series. Our results indicate the NRIG distribution has superior performance in fitting the stock market returns.
{"title":"Conditional Heavy Tails and the Stock Market Returns in Germany","authors":"J. Oden, Kevin J. Hurt, Susan Gentry","doi":"10.2139/ssrn.3013849","DOIUrl":"https://doi.org/10.2139/ssrn.3013849","url":null,"abstract":"As the fourth largest economy over the world, Germany’s financial sector plays a key role in the global economy. As one of the most important components of the financial sector, the equity market played a more and more important role. Thus, risk management of its stock market is crucial for welfare of its market participants. To account for the two stylized facts, volatility clustering and conditional heavy tails, we take advantage of the framework in Guo (2017a) and consider empirical performance of the GARCH model with normal reciprocal inverse Gaussian distribution in fitting the German stock return series. Our results indicate the NRIG distribution has superior performance in fitting the stock market returns.","PeriodicalId":414983,"journal":{"name":"IRPN: Innovation & Finance (Topic)","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-06-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121732012","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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