This thesis explores the utility of computational intelligent techniques and aims to contribute to the growing literature of hybrid neural networks and genetic programming applications in financial forecasting. The theoretical background and the description of the forecasting techniques are given in the first part of the thesis (chapters 1-3), while the contribution is provided through the last five self-contained chapters (chapters 4-8). Chapter 4 investigates the utility of the Psi Sigma neural network when applied to the task of forecasting and trading the Euro/Dollar exchange rate, while Kalman Filter estimation is tested in combining neural network forecasts. A time-varying leverage trading strategy based on volatility forecasts is also introduced. In chapter 5 three neural networks are used to forecast an exchange rate, while Kalman Filter, Genetic Programming and Support Vector Regression are implemented to provide stochastic and genetic forecast combinations. In addition, a hybrid leverage trading strategy tests if volatility forecasts and market shocks can be combined to boost the trading performance of the models. Chapter 6 presents a hybrid Genetic Algorithm – Support Vector Regression model for optimal parameter selection and feature subset combination. The model is applied to the task of forecasting and trading three euro exchange rates. The results of these chapters suggest that the stochastic and genetic neural network forecast combinations present superior forecasts and high profitability. In that way, more light is shed in the demanding issue of achieving statistical and trading efficiency in the foreign exchange markets. The focus of the next two chapters shifts from exchange rate forecasting to inflation and unemployment prediction through optimal macroeconomic variable selection. Chapter 7 focuses on forecasting the US inflation and unemployment, while chapter 8 presents the Rolling Genetic – Support Vector Regression model. The latter is applied to several forecasting exercises of inflation and unemployment of EMU members. Both chapters provide information on which set of macroeconomic indicators is found relevant to inflation and unemployment targeting on a monthly basis. The proposed models statistically outperform traditional ones. Hence, the voluminous literature, suggesting that non-linear time-varying approaches are more efficient and realistic in similar applications, is extended. From a technical point of view, these algorithms are superior to non-adaptive algorithms; avoid time consuming optimization approaches and efficiently cope with dimensionality and data-snooping issues.

Of the massive amount of failures experienced in corporate history, not every failure or banking distress has triggered a panic among market actors, which were just deemed as ‘bad apples’. On the other hand, there have been numerous instances where the weaknesses in economic fundamentals led to the breakdown of cooperation among market actors in the shape of bank runs. This research proposes an alternative reading of bank runs by its emphasis on ideas, not to replace but rather to supplement the explanations put forward by the banking panics literature. It analyses bank runs from a political economy perspective and highlights the role played by ideas. While not discounting the significance of the material and institutional settings, it suggests the use of cognitive heuristics by depositors during decision-making under uncertainty. Accordingly, depositor awareness towards the safety nets in place and collective memory of the past institutional failures are suggested as the two reference points (in addition to fundamentals) for depositor expectations to converge towards. This theoretical argument is tested with the banking crisis of 2007-09 in the United Kingdom with the aim of uncovering the following research puzzle: Within the period under examination, out of the four bank failures, namely Northern Rock, Bradford and Bingley, Alliance and Leicester, HBOS, only the first two experienced bank runs (although different in type) which resulted in their failures. The research objective of this thesis is, therefore, to explain and understand the motivations behind these depositor runs. With regards to research methods, empirical chapters apply a fully qualitative analysis –process tracing, within-case and cross-case analyses- and also utilise from counterfactuals in explaining depositor behaviour.

This thesis contains three essays on market microstructure. Chapter 1 studies how endogenous information acquisition affects financial markets by modelling potentially informed traders who optimally acquire variable information at increasing cost. Prices affect the informed trading by providing incentives for acquiring information. Endogenous information acquisition explains the stylised facts that informed trading and transaction volume spike after informational events and fall over time. My model also tells a cautionary tale for interpreting measures of informed trading. Three common empirical proxies derived under the exogenous assumption (spreads, Easley O'Hara's PIN and blockholder interest) do not agree with each other in my setup. Chapter 2 develops a more general framework with endogenous information acquisition which I use to examine the behaviour of an optimal monopolistic market maker. Unlike a competitive market maker, he sets prices to increase information revelation which is valuable to him. I characterise market information structure by whether narrower or wider spreads increase the information revealed by trades. An optimal monopolistic market maker may behave differently from the standard exogenous information benchmark. He may set narrower spreads in early periods. On average, spreads may widen over time. The different results arise from the interaction of a monopolistic market maker with endogenous information acquisition. Chapter 3 studies the impact of confidential treatment requests made by institutional investors to the Securities and Exchange Commission (SEC) to delay disclosure of their holdings. The SEC requires the manager to present a coherent on-going trading program in his request for confidential treatment. If granted, he is restricted to trade in a manner consistent with his reported forecast in the subsequent period. Under the restriction, the manager earns higher expected profits by applying for confidential treatment only if his probability of success exceeds a threshold. The model predicts that the price impact of a disclosed trade due to a confidential treatment request denial is greater than that of a disclosed trade where there is no request.

There have been lots of theoretical and empirical debates about the impact of demographic transition on the financial market. The main economic theory that is often cited to explain the causality is the lifecycle hypothesis. Since this hypothesis suggests that a lifetime saving pattern of individuals will have an inverted U-shape profile, there is a widely concern for the ‘market meltdown scenario’ whereby the stock market might collapse following the retirement of baby-boomers who will begin to dissipate their accumulated wealth. However, the actual dissaving rates of retired households appear to be relatively low. Therefore, no consensus regarding the actual causality of the demographic impact on asset prices has been reached. This thesis attempts to solve this puzzle by arguing that the strong relationship between asset prices and demographic variables observed since the 1960s may primarily result from a shift in the institutional structure of the financial market. The emergence of financial institutions, particularly pension schemes, has changed the way that the financial market operates. Instead of directly holding assets themselves, households have been using financial services provided by these institutions to manage their investments. By using a panel data from the Family Expenditure Survey, lifetime households’ participation rates in occupational pension schemes and personal pension plans are shown to significantly exhibit a strong hump-shape age pattern with a peak at 35-45. Interestingly, this age group has further been proved to have a long-term significant impact on UK equity prices. After analysing DB pension schemes employed by FTSE100 firms, the long-term asset allocation of these investors appears to significantly be influenced by the age structures of their policyholders. Therefore, the insight gleaned from this thesis strongly suggests that the investment behaviour of pension schemes may represent the underlying mechanism explaining the strong correlation between asset prices and demographic patterns.

The international investment regime (IIR) has been subject to several criticisms since the mid-2000s. There have been many calls for recalibration and reconsideration of the purpose of this regime. In response, subsequent investment awards have shown changes in areas such as the degree of legal stability, deference, or emergency exceptions. However, the calls for rebalancing and reform have not ceased. In fact, they have recently gained new impetus. In the last years, most critical research has focused on investment arbitration. In this line of argument, apparently, the controversial issue is the remedy and not the substance of the rights. This thesis contributes to this debate from the premise that looking at the remedies only cannot suffice to address the social tensions that the IIR creates between foreign investors, host states and host communities. Very limited attention has been devoted to the analysis of the potential effects international investment treaties may have on the very content of foreign investor's rights. By emphasising the procedural safeguards and guarantees international investment treaties provide, much of the legal debate implicitly overlooks whether or not investment tribunals are substantiating foreign investors' proprietary rights. this thesis addresses this gap in the literature examining the IIR as a legal regime that fulfils essential constitutional property functions: i.e. the substantiation and enforcement of proprietary rights. In case of an investment dispute, arbitrators very often define the measure of control that foreign investors enjoy over their assets. The content of foreign investors' rights depends on interpretation. The main argument of this thesis is that the interpretation of foreign investors' proprietary rights depends on the dominant justifications for foreign investment protection. As a result, contractualist and neo-utilitarian rationales constitute the basis to understand how investment tribunals substantiate foreign investors' rights over the resources of different countries. Relying on this claim, this thesis examines the socio-relational effects of the IIR on host countries and local populations. It concludes that the challenge for this regime is to balance the excessive focus on wealth maximisation through foreign investment.

The main objective of this thesis is to provide an empirical assessment of the popular methodologies for modelling the underlying spot price dynamics in energy markets. After a brief introduction in the alternative forms of derivation that may be used for speculative and risk management purposes in energy markets, we assess the performance of the standard Black's framework in modelling energy prices. For the first time in the literature we use a powerful and realistic data set which covers oil, gas and electricity markets and tests the appropriateness of the Geometric Brownian Motion process to explain the observed dynamics of the spot prices in these markets. We also provide spreadsheet based computer algorithms to price popular energy derivatives based on the Geometric Brownian Motion specifications. In Chapter-3 we try to accommodate observed stylised facts in the spot price behaviour, namely mean reversion and jumps. For the first time in the literature we test a jump diffusion model, and a mean reversion jump diffusion model against our broad data set and compare the findings to the Black's Geometric Brownian Motion specifications. In Chapter-4 we use a forward curve approach as an alternative-modelling framework to the spot price models. Based upon an almost proprietary data set of historical forward curves, we determine the number of independent factors that are needed to model the forward curve's dynamic evolution. After carrying out principal component analysis on historical forward data a threefactor-model emerges as the most appropriate for energy markets in general. The first factor being the volatility (level effect), the second the smile and the third sesonality. Finally in Chapter-5 of the thesis we compare the ability of spot models (Jump Diffusion and Mean Reversion Jump Diffusion Model) and forward curve based models to price WTI options. The results show that the Jump Diffusion Model is the best model as the option prices given are very accurate in comparison with the other models and closest to the market observed options prices.

The aim of this thesis is to extend theory and to develop practical applications of copulae in finance. A copula is a dependence function that links random variables - expressed through their marginal distributions - to their joint or multivariate distribution.

This thesis is organized in three self-contained projects which model predictability in both advanced and emerging stock markets and attempt to exploit it via construction of appropriate trading strategies. The objectives of this research are: 1) to model mean reversion in developed stock markets and re-assess the mixed empirical findings to date; 2) to characterize the returns generating process in emerging capital markets and examine the predictive ability and profitability of technical trading rules; 3) to develop and evaluate whether trading strategies involving dividend announcements in the UK are profitable and can be classified as statistical arbitrages, with consequent implications for the market efficiency hypothesis. We investigate the existence of mean reversion in the G-7 economies using a two factor continuous time model for national stock index data. Whilst maintaining the same modeling philosophy of previous studies, we rather focus on the effects of the "intrinsic" continuous time mean reverting coefficient. Our method produces support for mean reversion, even at low frequencies, and relatively small samples. We also aim to characterize the stock return dynamics in four Latin American and four Asian emerging capital market economies and assess the profitability of popular trading rules in these markets. We find that dollar denominated returns exhibit statistically significant long memory effects in volatility but not in the mean. "wading' our findings via a number of moving average and trading range break rules, we "beat" the buy and hold benchmark strategy in all markets before transaction costs, and in Asian markets even after transaction costs. Bootstrap simulations further reinforce the choice of the modeling framework and the trading outcomes, particularly for Latin American markets. Finally, we investigate whether trading strategies designed to exploit "abnormal" price behavior following dividend initiation/resumption and omission announcements of UK firms pass the statistical arbitrage test of Hogan et al. (2004). To mitigate concerns regarding "risky" arbitrage, we also calculate the probability of making a loss for each strategy. We find that strategies involving portfolios of dividend initiating/resuming firms are profitable and converge to riskless arbitrages over time, while this is not the case for strategies with dividend omitting firms, contrary to what is suggested by US studies. In general, the robustness of our results casts doubt on the market efficiency hypothesis in both developed and emerging capital markets.

This dissertation consists of three autonomous essays, discussing the following topics: 1. the pricing of defaultable bonds, loans and plain vanilla credit derivatives, 2. the use of risk-adjusted performance measurement, for optimal portfolio management in the banking, asset management and insurance industries 3. return on economic capital as a measure of value created by the holding of bank assets and the operation of bank business units.

With the growth of alternative investment vehicles such as hedge funds and the resulting search for "new" asset classes, the interest in the commodity market has been growing within the financial sector. The commodity futures markets have been successfully providing a platform for investors and industrial participants as an alternative investment vehicle and a tool for risk management. The storable commodity futures markets are characterised by two distinct market conditions: backwardation and contango, which are directly linked to market fundamentals such as inventory levels and thus influence the price dynamics and functioning of the commodity futures market. While there exists a large body of research in the area of commodity derivatives, research on the linkage between market dynamics and the market conditions as determined by fundamentals is very limited. Accordingly, this thesis aims to investigate the different market dynamics of metal futures markets under these two conditions. The issues under examination include the futures price discovery function, the forecasting performance of the futures price, the long-run cost-of-carry equilibrium and short-run time-varying adjustment, and the price volatility and its relationship with inventory levels and trading volume. The empirical findings suggest, for the first time, that the price discovery function depends on the state of the storable commodity markets: futures prices are found to be upward biased predictors of the future spot prices when the market is in contango and are downward biased when the market is in backwardation. Nonparametric bootstrap simulations confirm that the forecast errors are negative in a backwardation market and are positive in a contango market, and moreover the forecast errors are larger under the former market condition than the latter. The empirical results also show that the price volatility is higher in a backwardation market than in a contango market as indicated by the negative relationship between price volatility and inventory levels. We also show that the spot volatility is generally higher than the futures price volatility and the difference is greater when the inventory level is low. Moreover, the impact of trading volume on the futures price volatility is found to be stronger when the market is in backwardation in some of the markets. In short, the empirical findings in this thesis suggest that the functioning of the metal spot and futures market is dependent on market conditions of which the inventory level is an important indictor as implied by the theory of storage. The empirical findings have strong implications for practitioners (particularly, trading houses, funds and banks) who could potentially form different trading strategies based on the distinct market behaviour under the two market conditions.