Speculators can discover whether a signal is true or false by processing it but this takes time. Hence they face a trade-off between trading fast on a signal (i.e., before processing it), at the risk of trading on a false news, or trading after processing the signal, at the risk that prices...

Guasoni (2006) introduced a simple condition for the absence of arbitrage opportunities. In this note we show that his results remain valid under a weaker notion of arbitrage which arises by excluding liquidation costs from the value process of a portfolio

We present a simple theory of business-cycle movements of option prices and volumes. This theory relies on time-varying heterogeneity between agents in their demand for insurance against aggregate risk. Formally, we build an infinite-horizon model where agents face an aggregate risk, but also...

Financial markets witness high levels of activity at certain times, but remain calm at others. This makes the flow of physical time discontinuous. Therefore using physical time scales for studying financial time series, runs the risk of missing important activities. An alternative approach is...

We consider the channel consisting in transferring the credit risk associated with refinancing operations between financial institutions to market participants. In particular, we analyze liquidity and volatility premia on the French government debt securities market, since these assets are used...

The impact of exchange rate uncertainty on international trade has been discussed controversially in economic policy and theory for a long time. The paper surveys the theoretical investigations on this topic. The early modeis which analyse the influence of exchange rate uncertainty on trade,...

We examine a number of unexplored factors that affect the ex-post adoption rates of newly listed stock options. We show that a variety of measures of information asymmetries concerning underlying stocks predict option adoption rates. These predictive relationships are robust to control factors...

In this paper, we propose to identify the dependence structure existing between the returns of equity and commodity futures and its evolution through the past 20 years. The key point is that we do not do not impose the dependence structure but let the data select it. To do so, we model the...

This study re-examines the return-volatility relationship and dynamics under a new VAR framework. By analyzing two model-free implied volatility indices - VIX (the U.S.) and VKOSPI (Korea) - and their corresponding stock market indices, we found an asymmetric volatility phenomenon in both...

The article examines causal relationships between sovereign credit default swaps (CDS) prices for the BRICS and most important EU economies (Germany, France, the UK, Italy, Spain) during the European debt crisis. The cross-correlation function (CCF) approach used in the research distinguishes...