Ramzi Nekhili
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Systemic risk and interconnectedness in Gulf Cooperation Council banking systems
Banks and Bank Systems Volume 15, 2020 Issue #1 pp. 158-166
Views: 830 Downloads: 137 TO CITE АНОТАЦІЯNowadays, financial interconnectedness is the main driver of systemic risk. Thus, there is a constant need for tools to assess and manage systemic risk. This paper offers an alternative model framework to measure systemic risk and examine interconnectedness between direct exposures across banking systems in the emerging markets of the Gulf Cooperation Council (GCC). To ensure consistency and efficiency of systemic risk estimates and to capture its multifaceted nature, the methodology measures systemic risk using a combination of Filtered Historical Simulation and nonparametric regression and then examines the interconnectedness using a network analysis. The results reveal that shocks originating in the banking systems in Saudi Arabia may potentially cause a cascade of failures in the banking systems of most GCC countries. The banking system in Oman, however, is robust enough to withstand any ripple effect from adverse shocks affecting GCC’s major banking systems. Such results present some policy implications for regulators and supervisors and may benefit asset managers and investors in making portfolio allocation decisions.
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Brexit and the dependence structure among the G7 bank equity markets
Investment Management and Financial Innovations Volume 17, 2020 Issue #2 pp. 231-239
Views: 665 Downloads: 96 TO CITE АНОТАЦІЯThe UK referendum in June 2016 on leaving the European Union had a negative impact on banking stocks across the major financial markets. This has left with a question dealing with the effect of UK banking institutions on the systemic risk on a global scale. This paper aims at investigating the changes in the dependence structure between the UK bank equity returns and its counterparts in the G7 economies. The methodology used is based on the GJR-GARCH volatility spillover model that accounts for asymmetry and leverage, and copula for the time-varying correlation structure among G7 banks. Taking the data on bank equity return indices for G7 economies, the results indicate the symmetric dependence structure between the UK and Italian banks and the asymmetric dependence between the UK and the rest of G7 banks. This is due to the simultaneous decline in bank shares prices across the Union. Such results are important constituents for cross-country portfolio diversification.
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Are bitcoin futures contracts for hedging or speculation?
Investment Management and Financial Innovations Volume 17, 2020 Issue #3 pp. 1-9
Views: 1420 Downloads: 524 TO CITE АНОТАЦІЯThe emerging interest in Bitcoin futures market has led to questions on its trading form and contribution to risk minimization. These questions are important for market participants, including hedgers and speculators. This paper addresses the possible trading motive in Bitcoin futures market in being speculation or hedging. The author first tests a model relating Bitcoin futures returns with trading volume and conditional volatility, estimated with a GJR-GARCH specification, on a full sample of daily futures prices. A robustness check is then conducted by investigating the hedging effectiveness of Bitcoin futures and the speculation-hedging ratios on individual Bitcoin futures contracts. The estimation results on Bitcoin futures contracts, spanning from December 2017 to February 2020, show a significant positive relationship between futures returns and lagged volume. The speculation-hedging measures used for Bitcoin futures contracts maturing in March, June, September, and December reveal an increasing demand for speculation. Also, the Bitcoin spot’s full-hedge and OLS-hedge strategies with Bitcoin futures provide no gain over a no-hedge strategy. The results reveal strong evidence that traders in the Bitcoin futures market are motivated by speculation rather than hedging. This further puts in evidence the existence of asymmetric information within informed traders in Bitcoin futures market, and therefore market participants would not insure their positions against Bitcoin price movements.
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