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Changes in the capital structure before and after the global financial crisis for SMEs are studied, emphasizing their financing problems, distinguishing between internal financing and external financing determinants. The empirical research bears upon 158 small and medium-sized firms listed on Shenzhen and Shanghai Stock Exchanges in China over the period of 2004-2014. A regression analysis, along the lines of the Tra…
The objective of the note is to remind readers on how self-financing works in Quantitative Finance. The authors have observed continuing uncertainty on this issue which may be because it lies exactly at the intersection of stochastic calculus and finance. The concept of a self-financing trading strategy was originally, and carefully, introduced in (Harrison and Kreps 1979) and expanded very generally in (Harrison and…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which generalize the self-financing relationships of frictionless markets to electronic markets with limit order books. We use NASDAQ ITCH data to identify significant empirical features s…
Small Medium-sized Enterprises (SMEs) face many obstacles when they try to access credit market. These obstacles are increased if the SMEs are innovative. In this case, financial data are insufficient or even not reliable. Thus, when building a judgemental rating model, mainly based on qualitative criteria (soft information), it is very important to finance SMEs' activities. Until now, there isn't a multicriteria cre…
Constant product markets with concentrated liquidity (CL) are the most popular type of automated market makers. In this paper, we characterise the continuous-time wealth dynamics of strategic LPs who dynamically adjust their range of liquidity provision in CL pools. Their wealth results from fee income, the value of their holdings in the pool, and rebalancing costs. Next, we derive a self-financing and closed-form op…
Current post-trade clearing systems rely almost exclusively on cash or cash-like collateral, leaving vast reserves of short-term liquidity embedded in trade credit outside formal settlement infrastructures. A key barrier to integrating this liquidity is the near-universal dependence of clearing services on novation, which imposes institutional overhead that restricts accessibility and limits the range of obligations …
Automated market makers (AMMs) are a new type of trading venues which are revolutionising the way market participants interact. At present, the majority of AMMs are constant function market makers (CFMMs) where a deterministic trading function determines how markets are cleared. Within CFMMs, we focus on constant product market makers (CPMMs) which implements the concentrated liquidity (CL) feature. In this thesis we…
This chapter presents a history of international trade finance - the oldest domain of international finance - from its emergence in the Middle Ages up to today. We describe how the structure and governance of the global trade finance market changed over time and how trade credit instruments evolved. Trade finance products initially consisted of idiosyncratic assets issued by local merchants and bankers. The financing…
The financial industry has undergone a significant transition from the London Interbank Offered Rates (LIBORs) to Risk Free Rates (RFRs) such as, e.g., the Secured Overnight Financing Rate (SOFR) in the U.S. and the Cash Rate (AONIA) in Australia, as primary benchmark rates for borrowing costs. The paper examines the pricing and hedging method for financial products in a cross-currency framework with the special emph…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume the firm finances its risky assets by mainly issuing short- and long-term debt. Short-term debt can have either a discrete or a more realistic staggered tenor structure. At rollov…
We consider the problem of calculating risk-neutral implied volatilities of European options without relying on option mid prices but solely on bid and ask prices. We provide an approach, based on the conic finance paradigm, that allows to uniquely strip risk-neutral implied volatilities from bid and ask quotes, and that does not require restrictive assumptions. Our methodology also allows to jointly calculate the im…
A growing number of contributions in the literature have identified a puzzle in the European carbon allowance (EUA) market. Specifically, a persistent cost-of-carry spread (C-spread) over the risk-free rate has been observed. We are the first to explain the anomalous C-spread with the credit spread of the corporates involved in the emission trading scheme. We obtain statistical evidence that the C-spread is cointegra…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo haircuts. Moreover, the collateral rate term structure is not observable in the repo market, for derivatives netting sets are perpetual while repo tenors are typically in months. This arti…
In the field of quantitative finance, volatility models, such as ARCH, GARCH, FIGARCH, SV, EWMA, play the key role in risk and portfolio management. Meanwhile, factor investing is more and more famous since mid of 20 century. CAPM, Fama French three factor model, Fama French five-factor model, MSCI Barra factor model are mentioned and developed during this period. In this paper, we will show why we need adjust group …
Deep reinforcement learning (DRL) has been envisioned to have a competitive edge in quantitative finance. However, there is a steep development curve for quantitative traders to obtain an agent that automatically positions to win in the market, namely \textit{to decide where to trade, at what price} and \textit{what quantity}, due to the error-prone programming and arduous debugging. In this paper, we present the fir…
As deep reinforcement learning (DRL) has been recognized as an effective approach in quantitative finance, getting hands-on experiences is attractive to beginners. However, to train a practical DRL trading agent that decides where to trade, at what price, and what quantity involves error-prone and arduous development and debugging. In this paper, we introduce a DRL library FinRL that facilitates beginners to expose t…
In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as anomalies the theory of rational finance cannot explain: Predictability of asset returns, The Equity Premium, (The Volatility Puzzle. We offer resolutions of those objections within the rational finance. We do not claim that those are the only possible explanations of the anomalies, but offer statisti…
In finance industry portfolio construction deals with how to divide the investors' wealth across an asset-classes' menu in order to maximize the investors' gain. Main approaches in use at the present are based on variations of the classical Markowitz model. However, recent evolutions of the world market showed limitations of this method and motivated many researchers and practitioners to study alternative methodologi…
EMBI sovereign spread measures the yield premium on emerging-market sovereign debt over U.S. Treasuries and serves as a key gauge of EM credit risk and external financing stress.
Comparing DXY with an EM FX basket helps assess whether dollar strength is becoming a broader external-financing stress event for emerging markets.
SOFR is the Secured Overnight Financing Rate, a key benchmark for U.S. dollar funding based on overnight Treasury repo transactions.
MBS Prepayment Speed — Refinancing and turnover driven cash-flow uncertainty in agency mortgages.
Sudden Stop Capital Flows — Abrupt cessation of foreign financing forcing sharp macro adjustment.
Vendor Financing (Economy).
Debtor in Possession Financing (Fixed Income).
Commodity Inventory Financing — Repo-like financing of physical stocks linking curve to rates.
CA Deficit Financing Brazil (Emerging Markets).
CA Deficit Financing Mexico (Emerging Markets).
CA Deficit Financing Chile (Emerging Markets).
CA Deficit Financing Colombia (Emerging Markets).
CA Deficit Financing Peru (Emerging Markets).
CA Deficit Financing South Africa (Emerging Markets).
CA Deficit Financing Turkey (Emerging Markets).
CA Deficit Financing Poland (Emerging Markets).
CA Deficit Financing Hungary (Emerging Markets).
CA Deficit Financing Czech (Emerging Markets).
CA Deficit Financing India (Emerging Markets).
CA Deficit Financing Indonesia (Emerging Markets).
CA Deficit Financing Thailand (Emerging Markets).
CA Deficit Financing Malaysia (Emerging Markets).
CA Deficit Financing Philippines (Emerging Markets).
CA Deficit Financing Korea (Emerging Markets).
CA Deficit Financing Taiwan (Emerging Markets).
CA Deficit Financing China (Emerging Markets).
CA Deficit Financing Egypt (Emerging Markets).
CA Deficit Financing Nigeria (Emerging Markets).
CA Deficit Financing Brazil (Emerging Markets).
CA Deficit Financing Chile (Emerging Markets).
CA Deficit Financing China (Emerging Markets).
CA Deficit Financing Colombia (Emerging Markets).
CA Deficit Financing Czech (Emerging Markets).
CA Deficit Financing Egypt (Emerging Markets).
CA Deficit Financing Hungary (Emerging Markets).
CA Deficit Financing India (Emerging Markets).
CA Deficit Financing Indonesia (Emerging Markets).
CA Deficit Financing Korea (Emerging Markets).
CA Deficit Financing Malaysia (Emerging Markets).
CA Deficit Financing Mexico (Emerging Markets).
CA Deficit Financing Nigeria (Emerging Markets).
CA Deficit Financing Peru (Emerging Markets).
CA Deficit Financing Philippines (Emerging Markets).
CA Deficit Financing Poland (Emerging Markets).
CA Deficit Financing South Africa (Emerging Markets).
CA Deficit Financing Taiwan (Emerging Markets).
CA Deficit Financing Thailand (Emerging Markets).
CA Deficit Financing Turkey (Emerging Markets).
Commodity Inventory Financing — Repo-like financing of physical stocks linking curve to rates.
Debtor in Possession Financing (Fixed Income).
Comparing DXY with an EM FX basket helps assess whether dollar strength is becoming a broader external-financing stress event for emerging markets.
EMBI sovereign spread measures the yield premium on emerging-market sovereign debt over U.S. Treasuries and serves as a key gauge of EM credit risk and external financing stress.