Search results

This paper empirically shows that the long-term persistence of negative swap spreads, which was unique phenomenon only in Korean interest rate swap market, could be caused by the covered interest rate arbitrage trading by foreign investors in Korean market. It concretely shows the fixed rates of currency swap, whose decreases expand the incentive for arbitrage trading by foreign investors, to positively influence the interest rate swap spreads. The empirical results suggests that the foreign factors might make more effect on the interest rate swap market than the spot bond market, resulting in the negative interest rate swap spreads. The results implies that, the asset pricing for interest rate swap needs to consider the foreign factors under the circumstances of open capital market.

This paper aims to test three parametric models in pricing and hedging higher-order moment swaps. Using vanilla option prices from the volatility surface of the Euro Stoxx 50 Index, the paper shows that the pricing accuracy of these models is very satisfactory under four different pricing error functions. The result is that taking a position in a third moment swap considerably improves the performance of the standard hedge of a variance swap based on a static position in the log-contract and a dynamic trading strategy. The position in the third moment swap is taken by running a Monte Carlo simulation.

This paper undertook empirical tests of three parametric models. The aim of the paper is twofold: assess the pricing accuracy of these models and show how the classical hedge of the variance swap in terms of a position in a log-contract and a dynamic trading strategy can be significantly enhanced by using third-order moment swaps. The pricing accuracy was measured under four different pricing error functions. A Monte Carlo simulation was run to take a position in the third moment swap.

The results of the paper are twofold: the pricing accuracy of the Heston (1993) model and that of two Levy models with stochastic time and stochastic volatility are satisfactory; taking a position in third-order moment swaps can significantly improve the performance of the standard hedge of a variance swap.

The limitation is that these empirical tests are conducted on existing three parametric models. Maybe more critical insights could have been revealed had these tests been conducted in a brand new derivatives pricing model.

This work is 100 per cent original, and it undertook empirical tests of the pricing and hedging accuracy of existing three parametric models.

Sorting is a very important algorithm to solve problems in computer science. The most well-known divide and conquer sorting algorithm is quicksort. It starts with dividing the data into subarrays and finally sorting them.

In this paper, the algorithm named Dual Parallel Partition Sorting (DPPSort) is analyzed and optimized. It consists of a partitioning algorithm named Dual Parallel Partition (DPPartition). The DPPartition is analyzed and optimized in this paper and sorted with standard sorting functions named qsort and STLSort which are quicksort, and introsort algorithms, respectively. This algorithm is run on any shared memory/multicore systems. OpenMP library which supports multiprocessing programming is developed to be compatible with C/C++ standard library function. The authors’ algorithm recursively divides an unsorted array into two halves equally in parallel with Lomuto's partitioning and merge without compare-and-swap instructions. Then, qsort/STLSort is executed in parallel while the subarray is smaller than the sorting cutoff.

In the authors’ experiments, the 4-core Intel i7-6770 with Ubuntu Linux system is implemented. DPPSort is faster than qsort and STLSort up to 6.82× and 5.88× on Uint64 random distributions, respectively.

The authors can improve the performance of the parallel sorting algorithm by reducing the compare-and-swap instructions in the algorithm. This concept can be used to develop related problems to increase speedup of algorithms.

This study investigated the relationship between the CDS (credit default swap) market with the FX spot (FX swap) market, including the period of recent global financial crisis.

A measure for market efficiency is the condition that the derivative markets dominate the asset market in price discovery. In our case, however, FX market should be leading the CDS market. We found FX (spot and Derivatives) market has co-integration relationship with CDS market. Looking at Gonzalo Granger (GG) and Hasbrouck's price discovery measure, we found the FX spot and derivatives market dominated CDS market in price discovery.

This study has also examined the direction of shock spillover and volatility transmission between Korean CDS spread and Foreign exchange spot (FX swap) markets using the VECM bivariate GARCH approach. Our evidence suggested the presence of bi-directional shock volatility and volatility transmission between the CDS market and FX spot market partially exist. However, volatility spillover effects from CDS market to FX Swap market are stronger than in the reverse direction during the global financial crisis, indicating that the CDS spread signaling sovereign risk play a more important role in influencing the volatility of FX derivatives market.

There are some particular features in FX market. The volatility and shock of CIP deviations reflecting arbitrage opportunities in FX swap market are influenced by those of CDS spread in tranquil period prior to Lehman failure. But after Lehman failure CDS played a crucial role in signaling credit risk in FX derivatives market. We found that higher liquidity and trading volume of market matters more in price discovery and information transmission.

This study examines whether the variance risk is a priced risk factor in Korea using the over-the-counter variance swap quotes and realized variance data. We also study the term structure of variance risk premium. The empirical results show that the model with 2 stochastic variance risk factors with jumps in return is required to fit the variance swap and realized variance data. The analyses with the estimated models suggest that the variance risk premium in Korea are highly negative and the size of the premium increase with the maturities, meaning that risk averse investors in Korea are willing to pay a premium to hedge variance risk.

Credit default swaps (CDSs) are among the most widely used credit derivatives since their innovation and designed to hedge the credit risk of reference entities. They were exposed after the global financial crisis of 2007–08, and were blamed for its occurrence. This paper aims to describe the fundamental mechanism of CDSs, demonstrating how a CDSs contract works. Further, this study explores the growth of the global and Indian CDS market by taking a holistic perspective.

An objective-driven descriptive research design is adopted to achieve a rigorous and accurate analysis of the study. Therefore, research papers from high-impact journals have been carefully reviewed to achieve the aim of the study.

The study shows that CDSs are still in their infancy in India. Banks are the primary market makers and users in the Indian CDSs market; therefore, regulatory authorities must assist them to boost the market. For banks to become more confident, they should gain experience and knowledge from other active CDSs markets around the world.

This study attempts to provide insights into the current state of the global as well as the Indian CDS market. Further, this study suggests approaches for the Indian banking sector to play an active role in the Indian CDSs market.

This article examines the informational content of credit default swap (CDS) net notional for future stock and CDS prices. Using the information on CDS contracts registered in DTCC, a clearinghouse, I construct CDS-to-debt ratios from net notional, that is, the sum of net positive positions of all market participants, and total outstanding debt issued by the reference entity. Unlike the ratio using the sum of all outstanding CDS contracts, this ratio directly indicates how much of debt is insured with CDS and therefore, is a natural measure of investors’ concern on a credit event of the reference entity. Empirically, I find crosssectional evidence that the current increase in CDS-to-debt ratios can predict a decrease in stock prices and an increase in CDS premia of the reference firms in the next week. Greater predictability for firms with investment grade credit ratings or low CDS-to-debt ratios suggests that investors pay more attention to firms in good credit conditions than those regarded as junk or already insured considerably with CDS.

This paper tries to empirically investigate whether macroeconomic risk may be statistically useful in explaining long-term volatility of interest rate swap (IRS) in korean market. This paper uses the component-jump model to estimate long-term volatility of IRS from 1/2/2003 to 1/31/2013.

By using the component-jump model, the IRS volatility is decomposed into a long-term and a short-term component. According to this study, slope of yield curve and foreign exchange volatility as a proxy of macroeconomic risk have been significant in explaining long-term volatility of IRS.

This study investigates the influence of theoretical determinants on the Korea sovereign CDS spreads from January 2007 to September 2009 based on structural credit risk model. For the analysis of determinants on the sovereign CDS spread, this study adopts interest swap rate as reference interest rate, and decomposes yields curve into two components, ie, interest level and slope. Considering multivariate regression in level and difference variables, Stock returns and Interest rates have a significant effect on the CDS spreads among the theoretical determinants of structural credit risk models. CDS spreads may behave quite differently during volatile regime compared with their behavior in tranquil regime. We therefore apply Markov switching model to investigate the possibility that the influence of theoretical determinants of CDS spread has a regime dependent behavior. In all regimes Korean sovereign CDS spreads are highly sensitive to stock market returns, whereas in tranquil regime interest rates also have influence on CDS spreads. We conclude that for the efficient hedging of CDS exposure trader should adjust equity hedge ratio to the relevant regime.

The development of China's foreign exchange market and the reform of Chinese yuan (hereinafter “CNY”) exchange rate are closely linked with each other. Their respective journey through the past 70 years can both be divided into three historical periods; as follows: China's foreign exchange market underwent a difficult exploration period, a formation and development period and an innovative development period; in the meanwhile, the formation mechanism of CNY exchange rate also witnessed three periods marked successively by a single exchange rate system with administrative pricing, an explorative formation mechanism of CNY exchange rate and a reformed, marketized CNY exchange rate mechanism.

In the present world, the development of almost every country is closely linked to the international community, which is the result of the heterogeneity in system, market, humanity and history, in addition to the differences in natural resource endowments and the diversity in technology, administration, information, experience and diplomacy. International economic exchanges require foreign exchange, which gives rise to the existence and development of the foreign exchange market.

The 70-year history of China's foreign exchange market has proven the need to continue safeguarding national sovereignty and interests of the people, stick to the general direction of serving economic development, adhere to the strategy of steadily and orderly promoting the construction of the foreign exchange market, keep on making innovation in monetary policy operation and unbendingly stay away from any systemic financial risks.

During the 70-year history of the new China, as an indispensable economic resource in China's economic development, the foreign exchange mechanism bolstered each stage of economic development and was always an important manifestation of China's economic sovereignty. It is argued that during the 30-year planned economy that preceded reform and opening-up, China pursued a closed-door policy with few international economic exchanges. The subtext of such argument is that China did not have (or hardly had much of) a foreign exchange mechanism during this period, which is clearly in conflict with historical evidence. In fact, although China did not have an open foreign exchange market before the reform and opening-up, it had a clear foreign exchange management system and exchange rate system.