Abstract: Crises in financial markets affect humans worldwide. Detailed market data on trading decisions reflect some of the complex human behavior that has led to these crises. We suggest that massive new data sources resulting from human interaction with the Internet may offer a new perspective on the behavior of market participants in periods of large market movements. By analyzing changes in Google query volumes for search terms related to finance, we find patterns that may be interpreted as “early warning signs” of stock market moves. Our results illustrate the potential that combining extensive behavioral data sets offers for a better understanding of collective human behavior.

Abstract: Stress tests have become an important component of the supervisory toolkit. However, the extent of disclosure of stress-test results remains controversial. We argue that while stress tests uncover unique information to outsiders – because banks operate in second-best environments with multiple imperfections – there are potential endogenous costs associated with such disclosure.First, disclosure might interfere with the operation of the interbank market and the risk sharing provided in this market. Second, while disclosure might improve price efficiency and hence market discipline, it might also induce sub-optimal behavior in banks. Third, disclosure might induce ex post market externalities that lead to excessive and inefficient reaction to public news. Fourth, disclosure might also reduce traders incentives to gather information, which reduces market discipline because it hampers the ability of supervisors to learn from market data for their regulatory actions.Overall, we believe that disclosure of stress-test results is beneficial because it promotes financial stability. However, in promoting financial stability, such disclosures may exacerbate bank-specific inefficiencies. We provide some guidance on how such inefficiencies could be minimized.

Abstract: This paper describes our construction of the Global Financial Development Database and uses the data to compare financial systems around the world. The database provides information on financial systems in 205 economies over the period from 1960 to 2010 and includes measures of (1) size of financial institutions and markets (financial depth), (2) degree to which individuals and firms can and do use financial services (access), (3) efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and (4) stability of financial institutions and markets (stability).

Abstract: Macroprudential stress tests have been employed by regulators in the United States and Europe to assess and address the solvency condition of financial firms in adverse macroeconomic scenarios. We provide a test of these stress tests by comparing their risk assessments and outcomes to those from a simple methodology that relies on publicly available market data and forecasts the capital shortfall of financial firms in severe market-wide downturns. We find that: (i) The losses projected on financial firm balance-sheets compare well between actual stress tests and the market-data based assessments, and both relate well to actual realized losses in case of future stress to the economy; (ii) In striking contrast, the required capitalization of financial firms in stress tests is found to be rather low, and inadequate ex post, compared to that implied by market data; (iii) This discrepancy arises due to the reliance on regulatory risk weights in determining required levels of capital once stress-test losses are taken into account. In particular, the continued reliance on regulatory risk weights in stress tests appears to have left financial sectors under-capitalized, especially during the European sovereign debt crisis, and likely also provided perverse incentives to build up exposures to low risk-weight assets.

Abstract: The complex behavior of financial markets emerges from decisions made by many traders. Here, we exploit a large corpus of daily print issues of the Financial Times from 2nd January 2007 until 31st December 2012 to quantify the relationship between decisions taken in financial markets and developments in financial news. We find a positive correlation between the daily number of mentions of a company in the Financial Times and the daily transaction volume of a company's stock both on the day before the news is released, and on the same day as the news is released. Our results provide quantitative support for the suggestion that movements in financial markets and movements in financial news are intrinsically interlinked.

Abstract: We propose a methodology for forecasting the systemic impact of financial institutions in interconnected systems. Utilizing a five-year sample including the 2008/9 financial crisis, we demonstrate how the approach can be used for timely systemic risk monitoring of large European banks and insurance companies. We predict firms’ systemic relevance as the marginal impact of individual downside risks on systemic distress. The so-called systemic risk betas account for a company’s position within the network of financial interdependencies in addition to its balance sheet characteristics and its exposure towards general market conditions. Relying only on publicly available daily market data, we determine time-varying systemic risk networks, and forecast systemic relevance on a quarterly basis. Our empirical findings reveal time-varying risk channels and firms’ specific roles as risk transmitters and/or risk recipients.

Abstract: The current financial crisis offers a unique opportunity to investigate the leading properties of market indicators in a stressed environment and their usefulness from a banking supervision perspective. One pool of relevant information that has been little explored in the empirical literature is the market for bank’s exchange-traded option contracts. In this paper, we first extract implied volatility indicators from the prices of option contracts on financial firms’ equity. We then examine empirically their ability to predict financial distress by applying survival analysis techniques to a sample of large US financial firms. We find that market indicators extracted from option prices significantly explain the survival time of troubled financial firms and do a better job in predicting financial distress than other time-varying covariates typically included in bank failure models. Overall, both accounting information and option prices contain useful information of subsequent financial problems and, more importantly, their combination produces good forecasts in a high-stress financial world.

Abstract: This study investigates how banks design financial products to cater to yield-seeking investors. We focus on a large market of investment products targeted exclusively at households: retail structured products. These products typically offer a high return under their best-case scenario --the headline rate-- that is nested in a complex payoff formula. Using a text analysis of the payoff formulas of the 55,000 products issued in Europe from 2002 to 2010, we measure product headline rates, complexity and risk. Over this period, product headline rates depart from the prevailing interest rates as the latter decrease, complexity increases, and risky products become more common. In the cross section, the headline rate of a product is positively correlated with its level of complexity and risk. Higher headline rate, more complex, and riskier products, appear more profitable to the banks distributing them. Our results suggest that financial complexity is a by-product of banks catering to yield-seeking investors.

Abstract: Recently exchanges have been directly selling market data. We analyze how this practice affects price discovery, the cost of capital, return volatility, and market liquidity. We show that selling price data increases the cost of capital and volatility, worsens market efficiency and liquidity, and discourages the production of fundamental information relative to a world in which all traders freely observe prices. Generally allowing exchanges to sell price information benefits exchanges and harms liquidity traders. Overall, our results show that allowing exchanges to sell market data, rather than requiring it to be made freely available to the public, is undesirable.

Abstract: Web opinion feeds have become one of the most popular information sources users consult before buying products or contracting services. Negative opinions about a product can have a high impact in its sales figures. As a consequence, companies are more and more concerned about how to integrate opinion data in their business intelligence models so that they can predict sales figures or define new strategic goals. After analysing the requirements of this new application, this paper proposes a multidimensional data model to integrate sentiment data extracted from opinion posts in a traditional corporate data warehouse. Then, a new sentiment data extraction method that applies semantic annotation as a means to facilitate the integration of both types of data is presented. In this method, Wikipedia is used as the main knowledge resource, together with some well-known lexicons of opinion words and other corporate data and metadata stores describing the company products like, for example, technical specifications and user manuals. The resulting information system allows users to perform new analysis tasks by using the traditional OLAP-based data warehouse operators. We have developed a case study over a set of real opinions about digital devices which are offered by a wholesale dealer. Over this case study, the quality of the extracted sentiment data is evaluated, and some query examples that illustrate the potential uses of the integrated model are provided.

Abstract: It has been widely accepted that there exist investors who adopt momentum strategies in real stock markets. Understanding the momentum behavior is of both academic and practical importance. For this purpose, we propose and study a simple agent-based model of trading incorporating momentum investors and random investors. The random investors trade randomly all the time. The momentum investors could be idle, buying or selling, and they decide on their action by implementing an action threshold that assesses the most recent price movement. The model is able to reproduce some of the stylized facts observed in real markets, including the fat-tails in returns, weak long-term correlation and scaling behavior in the kurtosis of returns. An analytic treatment of the model relates the model parameters to several quantities that can be extracted from real data sets. To illustrate how the model can be applied, we show that real market data can be used to constrain the model parameters, which in turn provide information on the behavior of momentum investors in different markets.

Abstract: We use sector level REIT and transaction-based direct real estate data for the U.S. to provide a clearer understanding of the dynamic relations between public and private real estate returns. We exclude leverage from REIT returns to make the REIT data more comparable with the direct market data. We also include economic fundamentals in the analysis to take account of the influence of fundamentals on real estate market dynamics. Moreover, we consider the influence of the ‘escrow lag’ in the recording of private market prices. Even when catering for those factors, the generalized impulse responses from estimated vector error-correction models provide evidence of REIT returns leading private returns in the office, retail, and apartment sectors, but not in the industrial sector. These lead-lag relations are due to the slow reaction of private market returns to shocks in REIT returns and also in the risk premium and economic sentiment. The lead-lag relations remain even when the constant-liquidity direct market index is used instead of the conventional index.

Abstract: In response to the very large number of quantitative indicators that have been put forward to measure the level of systemic risk since the start of the subprime crisis, the paper surveys the different indicators available in the economic and financial literature. It distinguishes between (i) indicators related to institutions, based either on market data or regulatory/accounting data; (ii) indicators addressing risks in financial markets and infrastructures; (iii) indicators measuring interconnections and network effects - where research is currently very active-; and (iv) comprehensive indicators. All these indicators are critically assessed and ways forward for a better understanding of systemic risk are suggested.

Abstract: This article aims at underlying the importance of a correct modelling of the heavy-tail behavior of extreme values of financial data for an accurate risk estimation. Many financial models assume that prices follow normal distributions. This is not true for real market data, as stock (log-)returns show heavy-tails. In order to overcome this, price variations can be modeled using stable distribution, but then, as shown in this study, we observe that it over-estimates the Value-at-Risk. To overcome these empirical inconsistencies for normal or stable distributions, we analyze the tail behavior of price variations and show further evidence that power-law distributions are to be considered in risk models. Indeed, the efficiency of power-law risk models is proved by comprehensive backtesting experiments on the Value-at-Risk conducted on NYSE Euronext Paris stocks over the period 2001-2011.

Abstract: Innovation is basic need of the hour to attract new customers to the financial markets. "Financial Innovation" means finding new products and new features for existing financial products. Thus creating a new financial product or adding new features to existing financial product is the central theme of financial engineering. Hence, the innovative products should try to reduce financial risk and it should aim to reach "financial optimization". Innovation is mainly driven by modern Globalization and investors and government resulting in exposing to new and wider international risk, innovation becomes a new tool to solve, manage and transfer the entire extra burden. The deregulation of banking systems, in particular, promotes economic growth through improved allocation, efficiency and a reduction of financial service costs.

Abstract: High Frequency Trading (HFT) is a form of algorithmic trading where firms use high-speed market data and analytics to look for short-term supply and demand trading opportunities that often are the product of predictable behavioral or mechanical characteristics of financial markets. Often called “equity market making,” HFT firms usually hold their positions for less than a minute while perpetually looking for opportunities to buy and sell. These transactions happen thousands of times a day, take micro¬seconds, and often net less than a penny in profit per share traded. Concerns have been raised in recent years about the potential market risks associated with HFT and algorithmic trading in general. Some opponents have argued that these practices create risk and require aggressive regulation. Purported risks to the stability and integrity of financial markets created by HFT include the creation of a two-tiered market system as a result of asymmetric information, potential volatility, “noise” and informational distortions, out-of-control algorithms, and “flash crashes.” However, many of these concerns are neither new nor exclusively related to HFT. HFT is, quite simply, a contemporary tool that facilitates informational market efficiency and, as such, is capable of being regulated by the market and market participants — indeed, there is significant evidence to indicate HFT activity is already being regulated by the market. At the same time, HFT improves market efficiency by lowering the costs to investors, controlling volatility, and improving liquidity. Many of the concerns raised by those calling for increased regulation predate the emergence of HFT, and thus those concerns are not particular to HFT. There are, however, opportunities for regulators, HFT firms, and exchanges to continue to work together to monitor and develop internal and external “circuit breakers” and consolidated audit trails to ensure continued market stability and integrity.

Abstract: The unit of analysis in this study is mining companies listed in the Indonesia Stock Exchange. This unit data is represented by the audited company's financial statements and historical data of stock prices in Indonesia Stock Exchange. Financial statement data and historical data of the company's stock price used are from the year of 2009 to 2012. Companies sampled in the study only companies which meet the sampling criteria as many as 23 companies. We find corporate governance has no Influence on the risk. The better corporate governance will improve financial performance. The better corporate governance will increase the firm value. The higher risk will lower the financial performance, while capital structure has no influence on the risk. Capital structure has negative Influences to financial performance. Capital structure affect negatively to firm value. The better financial performance will improve the firm value. Keywords : corporate governance, capital structure, risk, financial performance, firm value

Abstract: This paper examines the value relevance of accounting fundamentals in the Mexican Stock Market ([BMV] – Bolsa Mexicana de Valores). The research question that motivated the paper was: Can accounting fundamentals provide relevant information to better understand firm value? More specifically, the paper examines whether the application of an accounting fundamental strategy to select stocks of a portfolio can systematically yield significant and positive excess market buy-and-hold returns after one and two years of portfolio formation. Based on valuation theory, accounting research and the maturity level of the BMV, a set of accounting fundamental signals is proposed that reflects information that influences security prices, but not necessarily in a timely manner. Using quarterly financial and market data from 196 BMV stocks from 1991 to 2011, it is shown that after controlling for earnings, book-to-market ratio and firm size, the fundamental strategy proposed here provides value information relevant to investors. The relationship between the accounting fundamental signals proposed and the buy-and-hold market future return (one-year and two-year returns) is significant and positive considering the 1991-2011 period. Portfolios formed with high scores of these signals show an average of 1.62% market excess annual return between 1991 and 2011, and about 9% between 1997 and 2011. Besides the practical implication of the findings – e.g. the possibility mispriced securities – this paper contributes to the scarce accounting research in Latin American capital markets by furthering understanding of the “post-earnings” drift phenomenon in the BMV.

Abstract: The purpose of this article is to assess the financial depth of the Russian economy in the context of its main rivalries within the BRIC group. The Russian financial market is evaluated by a set of key indicators that characterize the level of maturity of the national financial system in respect to international standards. This task is implemented through descriptive analysis of extensive international data generated from a time series covering the period 1995–2010. The article demonstrates that, in comparison to other emerging markets, and its closest competitors Brazil, India and China, the financial depth of the Russian economy may be characterized as inadequate. In the Russian financial market potential for growth is combined with exceptionally high risks. Insufficient depth of the financial system undermines its long-term competitiveness and exacerbates its exposure to shocks in the international market.

Abstract: This paper proposes a working definition for “financial stability” related to systemic risk. Systemic risk is then measured as the probability of disruption of financial services taking into account its time and cross-sectional dimensions and several risk factors. The paper discusses the implications of this definition for Brazil in the aftermath of the recent global financial crisis. A comparison with the United States and the Euro zone is provided. In addition, systemic risk in the Brazilian credit market is investigated given its crucial role as main financial stability driver. Finally, synthetic indicators of systemic risk are used to monitor financial stability. The link between systemic risk and synthetic indicators and/or well-correlated proxies (e.g., a credit-to-GDP gap) allows the calculation of the probability of disruption of the financial system across its time dimension. Therefore, if a Financial Stability Committee and/or the prudential regulator define its tolerance level for “financial stability” as a threshold measured by this probability of disruption, it might have the capability of determining the precise moment when it should strengthen its set of adequate macroprudential responses and policies.

Abstract: In recent years, the rapid growth in cross border international portfolio investments reflects the globalization of financial markets. The impetus for globalized financial markets initially comes from financial liberalization and high growth of capital such as superannuation funds, mutual funds, private funds and provident funds. In South-East Asia, the investment portfolios have been growing continuously after the financial crisis in 1997 because of the revival of Asian financial markets presenting new challenges to practitioners, policy makers and researchers in the finance discipline. Also, there are significant shifts in economics and financial variables underlying emerging markets due to re-alignment of currency values, deregulation and globalisation. This revival can make South-East Asian financial markets more attractive and result in higher growth. As a result, South-East Asian financial markets have become attractive market for foreign investors. However, South-East Asian nations have to counter the adverse impacts of domestic and global economic factors which make their financial markets volatile. The study of the factors affecting stock market has recognized the relationship between equity price, company performance, economic variables, financial liberalization, market integration, and incidents. However, these studies have not included some of the most significant recent change in the financial market, namely: oil price fluctuation, US subprime crisis, and the changing nature of political uncertainty. The literature on the contagion effects and the transmission of credit crisis has been limited to the developed financial markets in the western economies and those of the emerging markets in particular Thailand and South-East Asia financial markets have largely been left untouched. This is a serious limitation in the literature given the regional and international significance of these emerging markets. The purpose of the research is to identify the dominant factors affecting stock market volatility in Thailand and measure the contagion effects of stock market volatility in Thailand on other South-East Asian stock markets.

Abstract: The disclosed embodiments relate to communication of financial messages from an Exchange to market participants whereby messages directed to particular market participants may be consolidated with other messages directed to all market participants and communicated via the same communications medium while preserving the anonymity of those market participants to which messages are particularly directed. Accordingly, redundant communications are eliminated, reducing the overall volume of communicated data and the resources necessary in support thereof; inhibition of any one market participant intentionally or unintentionally influencing the market via exposure of their activities, or otherwise unfairly impinging on the exposed activities of other market participants, is maintained; and inequitable information access is eliminated as the consolidated messages are transmitted to all market participants substantially simultaneously over the same medium thereby minimizing or eliminating any advantage or opportunity one market participant may have to receive market information ahead of the other market participants.

Abstract: The purpose of this study is to investigate the effects of different mechanisms that used to solve the problems of financial, the problems of Financial and new financial market developments give rise to use new tools in risk management, asset management, mortgage finance, derivatives pricing and hedging, as well as the need to provide better tools to help financial decision making1.Financial institutions need the specialists with an understanding of problems financial strategies, with an expertise and practical know-how, at the same time need to focus on the significance of financial operations in the bigger picture. So I try show the importance and impact of financial engineering.Keywords: Financial Innovations, Venture Capital (VC), Corporate Finance Division (CFD), Capital Market Authority (CMA), World Federation of Exchanges (WFE), Note Issuance Facilities (NIFs), Collateralized Mortgage Obligation Bonds (CMOB).INTRODUCTION:Finance is one of the most important fundamentals of investment for any economy the world. The development of finance tools in order to the financial globalization requirements and the capital transfer among states has recently become the main concern of financial and banking experts, so financial engineering is the emergence of a new funding pattern differs from the traditional funding in vision of the risk levels in investments need funding2. That type of funding becomes important when the accumulative capital decreases3.The different mechanisms used to provide tools new investment, development in traditional securities, update methods financial restructuring of banks, tools financial, operations, which contribute to improved performance, increased profitability, check the speed and efficiency with cost savings. Any economy need new finance tools can improve growth and productivity. It meets the needs of corporations at the different funding stages. The activity of venture capital has begun in the United States of America and these institutions spread later in other countries with the aim of meeting the needs of investment funding and overcoming the inadequacy of supplied capital with suitable conditions of the existing financial institutions and providing funding for new or high risk projects which do not have growth potentials or high rate4. This paper try to focus on the different mechanisms used through the design, the development, and the implementation of innovative financial instruments and processes, and the formulation of creative's solution to problem in finance5.The outline of the paper is organized as follow: - In section 1, introduction, present the aim of this research, question of research and literature review on the modeling of credit migrations risks. Section 2 then provides the overview about financial engineering, advantage and factors contributing to the growth of financial engineering. Section 3, empirical studies of financial engineering and conclusions.OBJECTIVE OF THIS RESEARCH:The objective of this paper is to discuss the concept, forms, importance, and objectives of financing engineering with an indication of the advantages of this new funding type in light of the review of some experiences applied , the most important rules and policies necessary to support the success of this type of financing in the developing countries especially in Egypt. Provide insights about basic differences in the form of market failure in measuring credit risks. Provide insights about different financial engineering instruments. Provide insights about benefits of using financial engineering instruments as tools of public policy to promote regional development. Aid the government at increasing the role of the private sector in financial services provision, with strengthening role risk management in financial institutions.QUESTIONS RESEARCH:1. What are different financial engineering instruments?2. What are the specific market conditions - or traditions -used and which are used? …

Abstract: Financial markets have undergone tremendous changes in the last decades. Next to the automation of the trading process and the improvement in market quality, High Frequency Trading (HFT) plays a major role in financial markets. This thesis provides a background on the evolution of financial markets and the role of HFT in price discovery and the nature of its interaction with human traders.

Abstract: Field studies sponsored by the U.S. Department of Energy (DOE) have shown that the use of low-e storm windows can lead to significant heating and cooling energy savings in residential homes. This study examines the market for low-e storm windows based on market data, case studies, and recent experience with weatherization deployment programs. It uses information from interviews conducted with DOE researchers and industry partners involved in case studies and early deployment efforts related to low-e storm windows. In addition, this study examines potential barriers to market acceptance, assesses the market and energy savings potential, and identifies opportunities to transform the market for low-e storm windows and overcome market adoption barriers.

Abstract: We report an empirical study of a predictive analysis model for equities; the model uses high frequency (minute-bar) market data and quantified news sentiment data. The purpose of the study is to identify a predictive model which can be used in designing automated trading strategies. Given that trading strategies take into consideration three important characteristics of an asset, namely, return, volatility and liquidity, our model is designed to predict these three parameters for a collection of assets. The minute-bar market data as well as intraday news sentiment metadata have been provided by Thomson Reuters.

Abstract: Economists and policy makers in Europe and the United States have devoted increasing attention towards the German financial system. In the new Single European Market, the German financial system, characterised by universal banking with unrestricted entry into all types of financial market, is expected to become the dominant form. The German kind of financial system has also been suggested as an alternative to the segmented US financial system. It is argued that the success of the German system has less to do with the freedom granted to universal banks than with its approach to regulation and supervision.

Abstract: In a real-time application scenario, the proposed Probabilistic Fuzzy Logic (PFL) approach can be implemented in various applications such as health care, stock trading, click stream analysis, retail and supply chain management. This work analyses stock trading due to its high non-linear, uncertain and dynamic data over time. Therefore, this paper presents an innovative probabilistic approach for stock price prediction that minimizes the investors risk while investing money in the stock market. We implemented this approach in a publisher/subscriber middleware system, where the crucial Complex Event Processing (CEP) technology processes the large number of incoming stock quotes with the deployment of probabilistic framework. This methodology identifies the event patterns subscribed by the stock traders/brokers over the incoming event stock quotes of market data. This approach triggers an appropriate output event to notify the opportunities to buy and to sell share in real-time based on event patterns of price movements. Experimental evaluation is carried out based on the published data to demonstrate the effectiveness of the proposed approach.