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Risks
Volume 12
Issue 7
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Risks, Volume 12, Issue 7 (July 2024) – 5 articles

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21 pages, 629 KiB  
Article
Foreign Exchange Futures Trading and Spot Market Volatility in Thailand
by Woradee Jongadsayakul
Risks 2024, 12(7), 107; https://doi.org/10.3390/risks12070107 - 26 Jun 2024
Viewed by 223
Abstract
This paper investigates how the introduction of foreign exchange futures has an impact on spot volatility and considers the contemporaneous and dynamic relationship between spot volatility and foreign exchange futures trading activity, including trading volume and open interest in the Thailand Futures Exchange [...] Read more.
This paper investigates how the introduction of foreign exchange futures has an impact on spot volatility and considers the contemporaneous and dynamic relationship between spot volatility and foreign exchange futures trading activity, including trading volume and open interest in the Thailand Futures Exchange context, with the examples of the EUR/USD futures and USD/JPY futures. The results of the EGARCH (1,1) model show that the introduction of foreign exchange futures decreases spot volatility. It also increases the rate at which new information is impounded into spot prices but decreases the persistency of volatility shocks. A positive effect of unexpected trading volume and a negative effect of unexpected open interest on contemporaneous spot volatility are in line with the VAR(1) model results of the dynamic relationship between spot volatility and foreign exchange futures trading activity. With the impact on spot volatility caused by unexpected open interest rate being stronger than by unexpected trading volume, foreign exchange futures trading stabilizes spot volatility. Full article
(This article belongs to the Special Issue Volatility Modeling in Financial Market)
19 pages, 1039 KiB  
Article
Mean-Reverting Statistical Arbitrage Strategies in Crude Oil Markets
by Viviana Fanelli
Risks 2024, 12(7), 106; https://doi.org/10.3390/risks12070106 - 25 Jun 2024
Viewed by 206
Abstract
In this paper, we introduce the concept of statistical arbitrage through the definition of a mean-reverting trading strategy that captures persistent anomalies in long-run relationships among assets. We model the statistical arbitrage proceeding in three steps: (1) to identify mispricings in the chosen [...] Read more.
In this paper, we introduce the concept of statistical arbitrage through the definition of a mean-reverting trading strategy that captures persistent anomalies in long-run relationships among assets. We model the statistical arbitrage proceeding in three steps: (1) to identify mispricings in the chosen market, (2) to test mean-reverting statistical arbitrage, and (3) to develop statistical arbitrage trading strategies. We empirically investigate the existence of statistical arbitrage opportunities in crude oil markets. In particular, we focus on long-term pricing relationships between the West Texas Intermediate crude oil futures and a so-called statistical portfolio, composed by other two crude oils, Brent and Dubai. Firstly, the cointegration regression is used to track the persistent pricing equilibrium between the West Texas Intermediate crude oil price and the statistical portfolio value, and to identify mispricings between the two. Secondly, we verify that mispricing dynamics revert back to equilibrium with a predictable behaviour, and we exploit this stylized fact by applying the trading rules commonly used in equity markets to the crude oil market. The trading performance is then measured by three specific profit indicators on out-of-sample data. Full article
(This article belongs to the Special Issue Portfolio Theory, Financial Risk Analysis and Applications)
16 pages, 390 KiB  
Article
Intellectual Capital, Political Connection, and Firm Performance: Exploring from Indonesia
by Suham Cahyono and Ardianto Ardianto
Risks 2024, 12(7), 105; https://doi.org/10.3390/risks12070105 - 24 Jun 2024
Viewed by 229
Abstract
The relationship between intellectual capital and firm performance represents a critical facet of corporate governance, warranting comprehensive investigation. By analyzing data from 1151 non-financial firms listed on the Indonesia Stock Exchange over the period from 2018 to 2022, the authors utilize fixed effect [...] Read more.
The relationship between intellectual capital and firm performance represents a critical facet of corporate governance, warranting comprehensive investigation. By analyzing data from 1151 non-financial firms listed on the Indonesia Stock Exchange over the period from 2018 to 2022, the authors utilize fixed effect regression analysis to test their hypothesis. This study’s findings reveal a positive and significant relationship between intellectual capital and firm performance. Additionally, the interaction model incorporating political connections yields statistically significant results, indicating that political connections can moderate the relationship between intellectual capital and firm performance. This study makes a substantial contribution to the literature, particularly by advancing the understanding of corporate governance through the lens of intellectual capital’s influence on firm performance. It offers both theoretical and practical insights into the Indonesian context, highlighting the moderating role of political connections. Notably, this study is the first to incorporate interaction models to assess the impact of political connections on this relationship. Full article
(This article belongs to the Special Issue Corporate Finance and Intellectual Capital Management)
18 pages, 520 KiB  
Article
Inference for the Parameters of a Zero-Inflated Poisson Predictive Model
by Min Deng, Mostafa S. Aminzadeh and Banghee So
Risks 2024, 12(7), 104; https://doi.org/10.3390/risks12070104 - 24 Jun 2024
Viewed by 214
Abstract
In the insurance sector, Zero-Inflated models are commonly used due to the unique nature of insurance data, which often contain both genuine zeros (meaning no claims made) and potential claims. Although active developments in modeling excess zero data have occurred, the use of [...] Read more.
In the insurance sector, Zero-Inflated models are commonly used due to the unique nature of insurance data, which often contain both genuine zeros (meaning no claims made) and potential claims. Although active developments in modeling excess zero data have occurred, the use of Bayesian techniques for parameter estimation in Zero-Inflated Poisson models has not been widely explored. This research aims to introduce a new Bayesian approach for estimating the parameters of the Zero-Inflated Poisson model. The method involves employing Gamma and Beta prior distributions to derive closed formulas for Bayes estimators and predictive density. Additionally, we propose a data-driven approach for selecting hyper-parameter values that produce highly accurate Bayes estimates. Simulation studies confirm that, for small and moderate sample sizes, the Bayesian method outperforms the maximum likelihood (ML) method in terms of accuracy. To illustrate the ML and Bayesian methods proposed in the article, a real dataset is analyzed. Full article
(This article belongs to the Special Issue Statistical Applications to Insurance and Risk)
13 pages, 372 KiB  
Article
An Exposition of the Gap between Public Sector and Private Sector Participation in Green Finance
by Chekani Nkwaira and Huibrecht Margaretha Van der Poll
Risks 2024, 12(7), 103; https://doi.org/10.3390/risks12070103 - 21 Jun 2024
Viewed by 263
Abstract
Greening the environment cannot be achieved satisfactorily, considering that the private sector lags behind the public sector in participation levels. The purpose of this study was to determine the reasons behind the gap in green finance between the two sectors using numerically derived [...] Read more.
Greening the environment cannot be achieved satisfactorily, considering that the private sector lags behind the public sector in participation levels. The purpose of this study was to determine the reasons behind the gap in green finance between the two sectors using numerically derived outcomes. Six-year data in the form of total shareholder returns, comprising capital gains and dividends paid from the largest banks in China, the USA, and Europe involved in financing fossil fuels, were extracted from Yahoo.com finance and Macrotrends public forums. Equity premiums were calculated from the total shareholder returns and risk-free rates. A 95% confidence interval was established to determine the lower and upper limits of the equity premiums. The resulting upper limits were used to project premiums that could attract the private sector by 2030. Equity premiums averaged 2.73%, 9.73%, and 4.31% for China, the USA, and Europe, respectively, indicating the substantial task in the USA of attracting the private sector compared to Europe and China. The projections of total shareholder returns showed the same patterns in equity premiums among China, the United States (USA), and Europe. To bridge the gap, the significant need for economic benefits for the private sector should ideally be addressed through green bonds, tailored to green financing projects that are earmarked for revenue generation. Full article
(This article belongs to the Special Issue Tail Risk Analysis and Management)
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