"Smile-consistent" no-arbitrage stochastic volatility models take today's option prices as given, and they let them to evolve stochastically in such a way as to preclude arbitrage. This allows standard options to be priced correctly, and enables exotic options to be valued and hedged relative to them. We study how to model the dynamics of implied volatilities, since this is a necessary prerequisite for the implementation of these models. First, we investigate the number and shape of shocks that move implied volatility smiles, by applying Principal Components Analysis. The technique is applied to two different metrics: the strike, and the moneyness. Three distinct criteria are used to determine the number of components to retain. Subsequently, we construct a "Procrustes" type rotation in order to interpret them. Second, we use the same methodology to identify the number and shape of shocks that move implied volatility surfaces. In both cases, we find that the number of shocks is the same (two), in both metrics. Their interpretation is a shift for the first one, and a Z-shaped for the second. The results have implications for both option pricing and hedging, and for the economics of option pricing. Finally, we propose a new and general method for constructing a "smile-consistent" no-arbitrage stochastic volatility model: the simulation of the implied risk-neutral distribution. An algorithm for the simulation is developed when the first two moments change over time. It can be implemented easily, and it is based on the idea of mixture of distributions. It can also be generalized to cases where more complicated forms for the mixture are assumed.

This thesis is an examination of the Poverty Strategy Paper (PRSP) approach to regulating countries' access to external financing. It locates the PRSP project in the context of contemporary global governance and postcolonial international law and considers its impact on third world state engagement with the international economy and the regulatory webs and institutions, notably the World Bank and the International Monetary Fund (IMF), which underpin these relations. Approaching the subject from an inter- disciplinary perspective, straddling discourses of law, political economy and sociology, this research combines an empirical methodology for examining the linkages between the normative effect of the PRSP framework and the actors who advance these norms with a critical analysis of the power dynamics which underlie the relationships of the subjects and objects of the framework. The thesis demonstrates that far from its emancipatory language, the PRSP project, both in its operational and discursive manifestations, foreclose possibilities for the radical revision of the current asymmetrical rules and institutions of international economic law. Conversely, findings from this research suggest that the PRSP framework adversely reconfigures the form and substance of third world engagement with international law and the global economy. The PRSP project reframes fundamental tenets of international cooperation and global communal responsibility by problematising the state in the context of economic and social development; and constituting nation states as primary sites for the fulfilment of economic and social rights ascribed collectively. This restructuring takes place through a series of legal and institutional interventions of the PRSP framework, as well as through shifts in the regulatory mechanisms, notably the doctrine of conditionality, governing relationships between third world states and their external financiers. In this manner, the PRSP framework introduces a new regulatory discipline on third world states and represents a continuation, if not exacerbation, of the asymmetrical sovereignty characterising postcolonial international law and the imperial nature of the 'development' project sustaining the logic of these relationships, with significant impact on the potential for resistance and reform.

This thesis seeks to investigate identity formation within the London investment banking sector in the context of career development. The sector has undergone a host of changes in the past two decades. The ‘Old City’ was distinguished by trust, reputation and stability which was informally regulated through a kinship network comprised of a social elite. De-regulation in 1986 ushered in the ‘New City’ characterised by individualistic competition, inflated capital sums, truncated careers, volatility and diversification. Existing research concerning identity has largely focussed on how ‘Old City’ class and gender relations continue to predominate and shape career opportunities. Scholars have highlighted how patterns of privilege and exclusion are reproduced through a variety of ‘performances,’ disadvantaging those who are unable to access a limited range of acceptable class and gender positions. This study takes a different starting point to explore how ‘performance’ may play a role in identity work to further careers but in a way which is attentive to the distinctive conditions of the New City. Specifically, this research explores how identity may be constructed and constantly re-worked and revised, drawing upon a range of different resources within a highly diverse setting. The thesis seeks to engage with this research agenda by applying Giddens (1984; 1991) theoretical framework on self-identity, reflexivity and performance. A longitudinal research design was used to elicit qualitative data from six senior investment bank employees, gathering accounts on changes experienced over the period of a year as well as past events. The thesis investigates how a biographical narrative was reflexively maintained via the accommodation and perpetuation of a variety of different performances within a series of social terrains. These in turn served to reproduce the broader financial institutional context. A further contribution is developed which focuses on the theoretical interplays between selfidentity, reflexivity and performance through a detailed analysis of the empirical materials.

It is said among historians, that there are two remarkable innovations in modern finance: deposit banking in southern Europe and negotiable bills in northern Europe, especially Antwerp. Although negotiable bills are as important as deposit banking (because they became a foundation of modern commercial banking and stock markets), they are not often studied. Part I of the thesis studies indirect loan contracts which do not rely on either bank-specific technologies or legal protection. It focuses on the concept of negotiability and explains its characteristics, including the substitutability of deposit banking and negotiable bills. Negotiable bills, or resaleable bills, can be interpreted as an indirect loan contract. The buyer of the bill, i.e. the initial lender, can re-sell the bill to a third party to satisfy his liquidity needs. So the initial issuer of the bill borrows from a third party, through the initial lender (acting as an intermediary). Previous studies have focused on direct loan contracts: between banks and borrowers, depositors and banks, or suppliers and buyers. There are few papers studying the incentive problems faced by all three players. To fill this gap, in Chapter Two, we study indirect loan contracts that a lender and a borrower can make only through an intermediary agent, where the borrower and the lender cannot observe any transaction between the other two. Under this severe information asymmetry, the existence of loan contracts as a sequential equilibrium is proved, although they are less efficient compared with direct loan contracts. In Chapter Three, we consider role of collateral in improving efficiency. Chapter Four concludes, summarising the characteristics of these contracts: only less risky borrowers can issue negotiable bills and riskier borrowers need to seek a direct relationship with lenders (or, they are rationed). In the 1990s, the Japanese economy experienced a prolonged recession, the so-called ’lost decade’. It is discussed that a cause of the problem was the ”zombie lending” problem: chronic loss-making firms (zombies) still obtained finance from their banks. Part II of the thesis aims to address the following issues with a microeconomic model. Firstly, why did banks not liquidate bankrupt borrowers? Secondly, how did it affect macroeconomic productivity? And thirdly, how did it affect the procyclicality of land prices as in Kiyotaki and Moore(1997)’s credit cycle? A bank, in this model, has an incentive not to liquidate insolvent borrowers: the liquidation of collateral asset (land) will invite the collapse of land market and the bank has to bear a large loss. The loss may make the bank under-capitalised and force it to close its business. The bank, to avoid the forced closure, does not liquidate insolvent borrowers. This ”zombie borrowers” occupy their land unused, and the bank can squeeze land supply to push up land price: the bank’s own capital is then kept higher than it should be. In the final chapter, based on this model, optimal post-crisis policies are discussed by comparing two options; public capital injection and toxic asset purchasing scheme.

This thesis is concerned with the banking structure and its governance when the industrial policy and the banking technology change over time. The first part of the thesis briefly reviews the East Asian banking structure and its changes during the industrialisation. In chapter 2, we investigate the impact of industrial policy on banking behaviour and on the overall banking structure. We argue that the transition from a price-cap regulation (interest rate control) to a rate-of-return regulation (ROA and/or BIS ratio) induces a more concentrated banking structure as banking behaviour shifts from revenue maximising to profit maximising. Empirical evidence from Japan and Korea supports the argument. In chapter 3, we examine the behaviour of banks and customers when a new banking technology is introduced. The determinants of consumer adoption of internet banking are identified using survey data from Korea. Empirical issues of banking technology concerning customer inertia, risk aversion and pre-emption are assessed. During analysis finds no evidence of first mover advantage in internet banking, whilst the largest bank in commercial banking is dominant in internet banking. In chapter 4, we introduce ‘collective relationship banking’ as a new concept of banking to link the real and the banking sector structures. We analyse the choice between collective relationship banking and independent banking in addition to the switching between the two banking relationships using a case study. Changes in the corporate ownership structure appear to influence the banking relationship as well as its switching.

The aim of this thesis is to deepen our understanding of new empirical methods, results and implications in interest rate and foreign exchange markets. To this end, this thesis is organised in three chapters. The first chapter tests the validity of the Expectation Hypothesis (EH) of the term structure using daily data for US repo rates spanning the 1991-2005 sample period and ranging in maturity from overnight to three months. We revisit a recent study by Longstaff (2000a) by implementing statistical tests designed to increase test power in this context. Specifically, we apply the Lagrange Multiplier and Distance Metric statistics to test a set of,nonlinear cross-equation restrictions imposed by the EH on a vector autoregression model of the short- and long-term interest rates. We find that EH is rejected throughout the term structure examined on the basis of the statistical tests. In the second chapter, we extend the study carried out in the first chapter in a different direction and assess the economic value of departures from the EH based on criteria of profitability and economic significance. In the context of a mean-variance framework, we compare the performance of a dynamic portfolio strategy consistent with EH to a dynamic portfolio strategy that exploits the departures from the EH. The results of our economic analysis are favourable to the EH, suggesting that the statistical rejections of the EH in the repo market are economically insignificant. Finally, in the third chapter, we provide a comprehensive evaluation of the shorthorizon predictive ability of economic fundamentals and fonvard premia on monthly exchange rate returns in a framework that allows for volatility timing. We implement Bayesian methods for estimation and ranking of a set of empirical exchange rate models, and construct combined forecasts based on Deterministic and Bayesian Model Averaging. More importantly, we assess the economic value of the in-sample and out-of-sample forecasting power of the empirical models, and find two key results: (i) a risk averse investor will pay a high performance fee to switch from a dynamic portfolio strategy based on the random walk model to one which conditions on the forward premium with stochastic volatility innovations; and (ii) strategies based on combined forecasts yield large economic gains over the random walk benchmark. These two results are robust to reasonably high transaction costs.

This study provides an analysis of earthquake hazard in the Middle East for insurance and reinsurance purposes. The analysis incorporates important lessons learned from the 1985 Mexican earthquake. It has the following components: a) An in-depth examination of the Mexican earthquake. This has highlighted the strong influence of superficial geology in controlling exposure to earthquake hazard, and of building type and height in controlling vulnerability to damage; b) An analysis of the escalating earthquake risk in the Middle East. It is concluded that this is attributable to rapid rates of population growth, urbanisation and economic expansion, and to the development of marginal areas that are more exposed to earthquakes; c) A regional analysis of the distribution of earthquake hazard, based on 20th century data and a catalogue of historical earthquake activity that has been compiled during the research programme. It is shown that the areas of greatest hazard tend to coincide with the most densely inhabited parts of the region. The analysis has also provided evidence of temporal fluctuations in seismic activity between contiguous tectonic zones; d) The presentation of a new scheme for earthquake hazard zonation, which is designed to meet the specific requirements of insurers and reinsurers. An evaluation of this scheme, using Israel as a case-study, has proven its worth as a basis for detailed insurance-oriented examinations of earthquake hazard and risk; e) A discussion of earthquake risk control. It is concluded that the data and techniques presented in this study can be used to derive hazard and risk assessments that are more accurate than those currently available to the insurance industry. By using such assessments to control its own vulnerability to earthquake loss, the industry can help to stem the escalation of risk that has recently been witnessed in the Middle East.

Comprehensive economic reform in China from 1978 has introduced profound restructuring of its financial system, in particular the banking sector. Recent initiatives have focused on ownership transformation via foreign participation and stock listing. China's stock markets have reacted highly positively to the Initial Public Offering (IPO) of Chinese commercial banks. As stock listing has been considered as an effective tool to enhance the corporate governance of the firms, a case study using China Construction Bank (CCB) had been conducted to get a more detailed understanding of in what aspects had the corporate governance of the listed banks been enhanced after IPO? By comparing the annual reports of CCB from 1999 to 2008, I found that the bank had made quite profound and comprehensive changes since its IPO in 2005. In all major areas required by the corporate governance principles, the CCB had displayed a very high level of compliance although flaws in some fundamental aspects still existed. Since the end of 2007, the US credit crunch had induced turmoil in the global financial market that caused the collapse of several world banking giants. Nonetheless, Chinese commercial banks had stood apart from the rest of the world and achieved remarkable results. With improved corporate governance, we further tested whether the banks' performance had been enhance after IPO? Meanwhile, the influence of the financial crisis to China's financial market and the future reform of its banking sector had also been addressed in this thesis. Employing data of 14 listed Chinese banks for the period 1999 to 2008, we applied both Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA) to test our hypotheses. Our findings suggested that stock listing indeed could enhance the pure technical efficiency of the banks by about 5% and also improve their scale economies. A major contribution of this thesis is that it is the first study in English to employ two different frontier approaches to evaluate the effectiveness of IPO on the efficiency of Chinese banks. It also contributes to the growing literatures on the corporate governance issues related to IPO and firm performances, in particular under the background of China.

This Ph.D. thesis considers making some contributions to the asset pricing and financial risk management literature. First of all it offers some dynamics in the area of asset pricing which are practically implement able for pricing European style options. More precisely it considers blending GARCH type non-Markovian dynamics with Levy type Markovian innovations to offer analytic valuation of European style derivatives (at this initial stage). Revealing the mathematical underpinnings- required to replace conditional Gaussian innovations in G ARCH option pricing models by innovations coming from some Levy processes( with one sided and both sided jumps)-is the main focus. The necessity for this arises from the fact that the non-normal (Levy) innovations are crucial as heteroskedasticity alone doesn't suffice to capture the option smirk and the analytic valuation is highly expected because it makes the model practically implementable. Thus besides incorporating non-normality particular attention is paid to analytic valuation as well; though the Monte Carlo techniques can be readily applied for the proposed dynamics. However an approximation is required to uphold the analytic pricing, especially for innovations coming from Levy processes which are not Subordinator. These dynamics are capable of overcoming many deficiencies of benchmark Black-Scholes model and can be used to price other derivatives such as Credit, Interest rate, Commodity, Weather etc. The approach is built on a discrete time continuous state space and upholds the no-arbitrage principle of derivative pricing through the use of conditional Esscher transform to configure Equivalent :tviartingale Measure(EMl'vI). Similar to the existing literature, established for GARCH with normal innovations, existence of EMM provides de-facto evidence in support of no-arbitrage argument. Besides the main focus this research has made some complementary contributions to the option pricing literature. Since J.P.Morgan introduced RiskMetrics in 1994, the normal quantile based VaR has been considered as industry standard for risk management. However VaR itself has inherent inconsistencies which are exacerbated under the assumption of normality. The second part of this thesis considers two frequently referred approaches to non-normality in risk management : extreme value(EV) approach and Levy approach. The idea is to reveal the relative performance of various risk measures under full density based Levy approach and solely tail observation based EV approach. We provide empirical evidence which confirms that though purely tail based risk measures value-at-risk (VaR) and its coherent version expected shortfall (ES) are well comparable under both approaches, entire spectrum based spectral risk measure (SRM) is misleading for EV approach. Backtesting risk measure VaR is considered under both approaches. We plan to improve the computational efficiency of estimation of Levy coherent risk measures through application of characteristic function based FRFT. Our ultimate goal is to see whether the conditional moment generating functions -developed for GARCH-Levy models in the first part of this thesis- can be adapted to the characteristic function based FRFT technique in order to estimate the risk measures in analytic fashion.

The literature has little to say about M&A activities in emerging markets, especially when firms from these countries acquire targets in developed economies, yet this growing tendency has manifested itself clearly in the global markets for corporate control over the last two decades. Unsurprisingly, our understanding of what underpins their decisions to venture into more advanced economies or whether they are able to create or destroy value is still limited. Using recent data on the emerging markets, we find emerging-markets acquirers tend to acquire small firms with a relatively low stock of intangible assets in developed economies. This finding is in accordance with the strategic market entry hypothesis, which posits that acquirers aim to learn from more advanced markets through market entry and gradually consolidate their global competitive position in the long run. Nonetheless, no matter what their strategy really is, we find that it is unlikely to materialize in the long run, or at least in the course of three, four or five years. Expected synergies are likely to be overwhelmed by the strong nature of the value destruction of cross-border acquisitions and evident agency and hubris problems.