1,721,006 research outputs found
A SHARP model of bid–ask spread forecasts
No full textThis paper proposes an accurate, parsimonious and fast-to-estimate forecasting model for integer-valued time series with long memory and seasonality. The modelling is achieved through an autoregressive Poisson process with a predictable stochastic intensity that is determined by two factors: a seasonal intraday pattern and a heterogeneous autoregressive component. We call the model SHARP, which is an acronym for seasonal heterogeneous autoregressive Poisson. We also present a mixed-data sampling extension of the model, which adopts the historical information flow more efficiently and provides the best (among all the models considered) forecasting performances, empirically, for the bid-ask spreads of NYSE equity stocks. We conclude by showing how bid-ask spread forecasts based on the SHARP model can be exploited in order to reduce the total cost incurred by a trader who is willing to buy or sell a given amount of an equity stock. (C) 2019 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved
Assessing systemic risk due to fire sales spillover through maximum entropy network reconstruction
Full text linkMonitoring and assessing systemic risk in financial markets is of great importance but it often requires data that are unavailable or available at a very low frequency. For this reason, systemic risk assessment with partial information is potentially very useful for regulators and other stakeholders. In this paper we consider systemic risk due to fire sales spillovers and portfolio rebalancing by using the risk metrics defined by Greenwood et al. 2015). By using a method based on the constrained minimization of the Cross Entropy, we show that it is possible to assess aggregated and single bank's systemicness and vulnerability, using only the information on the size of each bank and the capitalization of each investment asset. We also compare our approach with an alternative widespread application of the Maximum Entropy principle allowing to derive graph probability distributions and generating scenarios and we use it to propose a statistical test for a change in banks' vulnerability to systemic events. (C) 2018 The Author(s). Published by Elsevier B.V
Jump detection and long range dependence
No full textMemory properties of financial assets are investigated. Using Detrended Fluctuation Analysis we show that the long memory detection in volatility is affected by the presence of jumps, realized volatility being a biased volatility proxy. We propose threshold bipower variation as an alternative volatility estimator unaffected by discontinuous variations. We also show that, with typical sample sizes, DFA is unable to disentangle long memory from short range dependence with characteristic time comparable to the whole sample length
Electricity prices: a nonparametric approach
No full textWe propose a simple univariate model for the dynamics of spot electricity prices. The model is nonparametric in the sense that it is free from parametric model assumptions and flexible in capturing the dynamics of the data. The estimation is performed in two steps. Preliminarily, spikes are identified by means of an iterative filtering technique. The series of spikes is used to estimate a seasonal spike intensity function and fitted with an exponential law. We then implement Nadaraya-Watson estimators for the drift and the diffusion coefficients on the filtered series. Monte Carlo simulations are used to evaluate estimation errors.
We fit the model on European and American time series of spot day-ahead electricity prices; in spite of the simplicity of the proposed model, our specification tests indicate successful goodness-of-fit. We provide evidence for mean-reversion, nonlinear volatility and seasonal spike intensity; moreover we find that American markets show a very low level of mean reversion and a lower volatility with respect to their European counterparts
A closed-form formula characterization of the Epps effect
No full textIn this study we provide an analytical characterization of the impact of zero returns on the popular realized covariance estimator of Barndorff-Nielsen and Shephard [Econometric analysis of realized covariation: High frequency based covariance, regression, and correlation in financial economics. Econometrica, 2004, 72(3), 885-925]. In our framework, efficient price processes evolve as a semimartingale with some likelihood of repeated prices. We show that the standard realized covariance estimator is asymptotically affected by a downward bias, and the size of the bias depends on these likelihoods. We demonstrate that this result can be used to construct a consistent estimator of the integrated covariance of a vector semimartingale. The advantages with respect to other estimators are discussed with data
The extraction of natural resources: The role of thermodynamic efficiency
No full textThe modelling of production in microeconomics has been the subject of heated debate. The controversial
issues include the substitutability between production inputs, the role of time and the economic
consequences of irreversibility in the production process. A case in point is the use of Cobb–Douglas type
production functions, which completely ignore the physical process underlying the production of a good.We
examine these issues in the context of the production of a basic commodity (such as copper or aluminium).
We model the extraction and the refinement of a valuable substance which is mixed with waste material, in a
way which is fully consistent with the physical constraints of the process. The resulting analytical description
of production unambiguously reveals that perfect substitutability between production inputs fails if a
corrected thermodynamic approach is used. We analyze the equilibrium pricing of a commodity extracted in
an irreversible way. We force consumers to purchase goods using energy as the means of payment and force
the firm to account in terms of energy. The resulting market provides the firm with a form of reversibility of
its use of energy. Under an energy numeraire, energy resources will naturally be used in a more parsimonious
way
The impact of systemic and illiquidity risk on financing with risky collateral
No full textRepurchase agreements (repos) are one of the most important sources of funding liquidity for many financial investors and intermediaries. In a repo, some assets are given by a borrower as collateral in exchange of funding. The capital given to the borrower is the market value of the collateral, reduced by an amount termed as haircut (or margin). The haircut protects the capital lender from loss of value of the collateral contingent on the borrower׳s default. For this reason, the haircut is typically calculated with a simple Value at Risk estimation of the collateral for the purpose of preventing the risk associated to volatility. However, other risk factors should be included in the haircut and a severe undervaluation of them could result in a significant loss of value of the collateral if the borrower defaults. In this paper we present a stylized model of the financial system, which allows us to compute the haircut incorporating the liquidity risk of the collateral and, most important, possible systemic effects. These are mainly due to the similarity of bank portfolios, excessive leverage of financial institutions, and illiquidity of assets. The model is analytically solvable under some simplifying assumptions and robust to the relaxation of these assumptions, as shown through Monte Carlo simulations. We also show which are the most critical model parameters for the determination of haircuts
Statistical inferences for price staleness
Full text linkThis paper proposes a nonparametric theory for statistical inferences on zero returns of high-frequency asset prices. Using an infill asymptotic design, we derive limit theorems for the percentage of zero returns observed on a finite time interval and for other related quantities. Within this framework, we develop two nonparametric tests. First, we test whether intra-day zero returns are independent and identically distributed. Second, we test whether intra-day variation of the likelihood of occurrence of zero returns can be solely explained by a deterministic diurnal pattern. In an empirical application to ten representative stocks of the NYSE, we provide evidence that the null of independent and identically distributed intra-day zero returns can be conclusively rejected. We further find that a deterministic diurnal pattern is not sufficient to explain the intra-day variability of the distribution of zero returns
The influence of the astrocyte field on neuronal dynamics and synchronization
No full textAstrocytes can sense local synaptic release of glutamate by metabotropic glutamate receptors. Receptor activation in turn can mediate transient increases of astrocytic intracellular calcium concentration through inositol 1,4,5-trisphosphate production. Notably, the perturbation of calcium concentration can propagate to other adjacent astrocytes. Astrocytic calcium signaling can therefore be linked to synaptic information transfer between neurons. On the other hand, astrocytes can also modulate neuronal activity by feeding back onto synaptic terminals in a fashion that depends on their intracellular calcium concentration. Thus, astrocytes can also be active partners in neuronal network activity. The aim of our study is to provide a computationally simple network model of mutual neuron-astrocyte interactions, in order to investigate the possible roles of astrocytes in neuronal network dynamics. In particular, we focus on the information entropy of neuronal firing of the whole network, considering how it could be affected by neuron-glial interactions
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