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

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...

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,...

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...

Traditional risk-adjusted performance measures, such as the Sharpe ratio, the Treynor index or Jensen's alpha, based on the mean-variance framework, are widely used to rank mutual funds. However, performance measures that consider risk by taking into account only losses, such as Value-at-Risk...

Daily financial market returns (as log difference in closing prices) may be quite sensitive to operations with low trading volumes and big changes in prices frequently traded at market closing times. This paper proposes a more robust estimation of market, returns by providing a new indicator...

In modern macroeconomic models it is difficult to obtain explosive price bubbles on assets with positive net supply. This paper shows that it is possible to obtain explosive bubbles in certain situations when assets such as land are used as collateral and lenders are willing to lend freely...

We study the well-known multiplicative Lognormal cascade process in which the multiplication of Gaussian and Lognormally distributed random variables yields time series with intermittent bursts of activity. Due to the non-stationarity of this process and the combinatorial nature of such a...

The volatility specification of the Markov-switching Multifractal (MSM) model is proposed as an alternative mechanism for realized volatility (RV). We estimate the RV-MSM model via Generalized Method of Moments and perform forecasting by means of best linear forecasts derived via the...