This thesis investigates dynamics of determinants of government bond spreads in EMU and non-EMU countries, using non-linear Markov-switching method and Dynamic model averaging. Utilizing Dynamic model averaging we found evidence of three bond pricing regimes - pre-crisis, crisis and post Outright monetary transaction announcements. These three regimes are characteristic for all EMU countries (except Slovak Republic) and Czech Republic. Announcements of OMTs triggered post OMTs announcement regime also in Slovak republic. Third regime is not present in Poland, Hungary and United Kingdom. Moreover United Kingdom has only one regime and is dominated solely by market expectations. We found that there is heterogeneity in the determinants of bond spreads across all examined countries. Moreover we found that spreads are significantly related to market and economic sentiments. JEL Classification F12, F21, F23, H25, H71, H87 Keywords Bond yields, bond spreads, DMA Author's e-mail jan.popadak@fsv.cuni.cz Supervisor's e-mail jaromir.baxa@fsv.cuni.cz

Sound transmission through a fluctuating deep ocean environment is considered. It is assumed that the environment consists of a range-independent background, on which a small-scale perturbation, due for example to internal waves, is superimposed. The modal description of underwater sound propagation is used extensively. The temporal spread of modal group arrivals in weakly range-dependent deep ocean environments is considered. The phrase "modal group arrival" refers to the contribution to a transient wavefield corresponding to a fixed mode number. It is shown that there are three contributions to modal group time spreads which combine approximately in quadrature. These are the reciprocal bandwidth, a deterministic dispersive contribution, and a scattering-induced contribution. The latter two contributions are shown to be proportional to the waveguide invariant beta, a property of the background sound speed profile. The results presented are based mostly on asymptotic theory. Some extensions of the asymptotic modal theory are developed. These theoretical results are shown to agree well with full-wave numerical wavefield simulations and available exact mode theoretical results. Theoretical predictions of modal group time spreads are compared to estimates derived from data that was collected during the 2004 LOAPEX experiment. The effects of deficiencies in the receiving array on estimates of modal group time spreads are discussed. It is shown that in spite of array deficiencies in the LOAPEX measurements it is possible to estimate modal group time spreads for almost all propagating modes and these estimates agree well with results obtained from numerical simulations and the developed theory. The effect of ocean internal waves on sound speed fluctuations is also considered, motivated by the observation that the amount of energy being scattered along the propagation path is sometimes greater in the experimental data than predicted by numerical simulations and theory. It is shown that the usual assumption that the potential sound speed gradient is proportional to the squared buoyancy frequency is often not a good approximation.

In this thesis, I imply a forward-looking systematic factor from CDO market spreads; I show that this factor is a measure of CDO market's expectation of future default correlation, and I empirically show that it is positively related to bond credit spreads. From this, I infer that corporate bond credit spreads are positively related to expected default correlation. The forward-looking factor stems from a CDO valuation model that I propose. The model assumes default can be characterized as a random event that occurs with an uncertain hazard rate that is mixture-Weibull distributed. Calibrating the model to CDO market spreads implies the model parameters. Using two and three mixing densities and data spanning January 2004 to February 2008, I show that the model calibrates to both the North American and European investment grade CDOs with negligible error. The factor I imply from the CDO market quotes is the standard deviation of the implied hazard rate density. I then show that the standard deviation of the implied hazard rate density increases as default correlation increases. This is done by characterizing firms' defaults with stochastic hazard rates that are defined by jump-diffusion processes that are correlated only through the Weiner processes, only through systematic jumps, or both. I use the models to generate CDO model spreads that are used to imply mixture-Weibull hazard rate densities. In addition, I provide evidence that the implied hazard rate density standard deviation has time variation that is independent to that of other common systematic factors. Lastly, I show that bond credit spreads are positively correlated with the standard deviation of the implied hazard rate density, and I conclude that credit spreads are positively related to expected default correlation. I provide evidence that firms' credit spreads are decreasing in firm diversity; that credit spread sensitivity to default correlation is decreasing in firm equity option implied volatility and decreasing in firm diversity; and that the variation in high credit quality bond spreads is predominantly explained by systematic factors whereas the variation in low credit quality bond spreads is explained by systematic and idiosyncratic factors.

In this thesis, I imply a forward-looking systematic factor from CDO market spreads; I show that this factor is a measure of CDO market's expectation of future default correlation, and I empirically show that it is positively related to bond credit spreads. From this, I infer that corporate bond credit spreads are positively related to expected default correlation. The forward-looking factor stems from a CDO valuation model that I propose. The model assumes default can be characterized as a random event that occurs with an uncertain hazard rate that is mixture-Weibull distributed. Calibrating the model to CDO market spreads implies the model parameters. Using two and three mixing densities and data spanning January 2004 to February 2008, I show that the model calibrates to both the North American and European investment grade CDOs with negligible error. The factor I imply from the CDO market quotes is the standard deviation of the implied hazard rate density. I then show that the standard deviation of the implied hazard rate density increases as default correlation increases. This is done by characterizing firms' defaults with stochastic hazard rates that are defined by jump-diffusion processes that are correlated only through the Weiner processes, only through systematic jumps, or both. I use the models to generate CDO model spreads that are used to imply mixture-Weibull hazard rate densities. In addition, I provide evidence that the implied hazard rate density standard deviation has time variation that is independent to that of other common systematic factors. Lastly, I show that bond credit spreads are positively correlated with the standard deviation of the implied hazard rate density, and I conclude that credit spreads are positively related to expected default correlation. I provide evidence that firms' credit spreads are decreasing in firm diversity; that credit spread sensitivity to default correlation is decreasing in firm equity option implied volatility and decreasing in firm diversity; and that the variation in high credit quality bond spreads is predominantly explained by systematic factors whereas the variation in low credit quality bond spreads is explained by systematic and idiosyncratic factors.

This paper will examine the effects of inside information on bid-ask spreads when the probability of insider trading and the likelihood of an informational event occurring varies using a theoretical, simulation-based approach. The results show that bid-ask spreads narrow as the number of time periods increase, regardless of probability of insider trading or the likelihood of an informational event occurring. For a high, given likelihood of an informational event occurring, the highest average spreads were found for lower probabilities of insider trading as time increased. For a high, given probability of insider trading, the highest average spreads were found for lower likelihoods of an informational event occurring as time increased. The variances increased along with the probability of insider trading as well as with the likelihood of an informational event occurring. The maximum average spread settled near 0.25, typically found for a probability of insider trading of 1 and a likelihood of an information event occurring of 0.5. The results verify previous research done by Glosten and Milgrom (1985), Easley, Hvidkjaer and O’Hara (2002) and Potterton (2011). The results also may reconcile the differences between the findings of Easley, Hvidkjaer and O’Hara (2002) and Potterton (2011).

In this thesis I study the investment climate in the four rapidly growing emerging economies Brazil, Russia, India and China (BRIC). The first study, Chapter 2, uses a bivariate EGARCH methodology with time varying conditional correlation to study the global and regional integration of the BRICs and to identify the existence of diversification opportunities for international investors. The second study, Chapter 3, employs a restricted version of the model to explore the relationship between equity market returns and volatility of equity returns in the BRIC countries and global oil prices. Chapter 4 is an extension of Chapter 3, and focuses on the sustainability of Russia???s economic growth in view of its large dependence on oil income. A qualitative analysis of the oil industry in Russia, including an overview of the operations of the largest oil producing companies, government regulations, oil production and proven oil reserves, is conducted for the purpose of this study. The last study, Chapter 5, uses a panel data methodology to explore the determinants of changes in sovereign bond spreads for the BRICs as an asset class and for each of the BRIC countries individually. I conclude that the regional and global level of integration of the BRICs is relatively low, and portfolio investors can enjoy sound diversification benefits particularly by taking investment positions in the Indian and Chinese equity markets. Despite the aggressive economic growth of the BRICs and their increased oil consumption, the volatility of stock returns from the BRICs does not have a significant impact on global oil prices; however, oil prices do impact the volatility of equity returns in India and China, and particularly the level of returns and volatility of equity returns in Russia. Based on this and the qualitative analysis in Chapter 4, it is concluded that in the short to medium term Russia???s continued economic growth will depend on increased reinvestment in the oil industry and in the longer term the government should diversify its revenue sources and focus on development of other sectors within the economy. Lastly, it is concluded that sovereign risk in the BRICs is driven by different global and country-specific factors, hence risk should be observed on an individual country basis and not for the BRICs as an asset class.

Volatility is a fascinating and important topic for financial markets in general, and probably the single most important issue in financial risk management. Although volatility itself is not synonymous with risk, it is closely associated with it in the realm of risk management. In this study, I focus on the volatility in the foreign exchange markets and investigate the spillover of volatility from this market to equity correlations and its impact on global equity markets’ bid-ask spreads as a proxy for market quality. I also explore the role that accounting earnings quality play in subsequent volatility in U.S. equity markets. I provide a theoretical base and its associated empirics for the link between exchange rate volatilities and global equity correlations. I test this theory using multiple techniques that ends with the application of autoregressive error correction analysis, wherein, I demonstrate the predictive power of options implied exchange rate volatilities against ex-ante global equity correlations. My findings indicate that exchange rate implied volatilities, coupled with one-period ex-post correlations, are more predictive of subsequent equity market correlations than other models. I then examine the impact of currency volatilities on the average monthly spreads in ADRs and their underlying local shares. I employ dynamic panel data estimation and principal component analysis to show that currency volatility explains a significant portion (16.6%) of the variation in spreads across markets, heretofore largely unexplored by extant finance literature. Finally, I employ well established accrual measures to calculate aggregate accruals for the S&P 500 on a quarterly basis and examine the ability of this aggregate measure to forecast future trends in the volatility of the index. I find a statistically significant relation between subsequent twelve-month volatility in the S&P 500 index and aggregate accruals. This relation holds whether total or abnormal accruals measures are employed. My findings document a rare long-term indicator of volatility in the widely followed index. I also show that my aggregate accrual measure yields additional information about S&P 500 volatility when compared with simple historical volatility measures or option implied volatility.

The purpose of the thesis is to identify factors that affect the profitability and risk of trading futures calendar spreads. The basic characteristics of futures and trading calendar spreads with seasonal time frames are described in the first part of the thesis. The selected factors such as the correlation of short-term and long-term seasonal patterns, the trading in the extreme, the trading single or multiple crops, the width of the seasonal window, the win probability, the length of backtested period and intermarket vs. intramarket spreads are analyzed from the perspective of profitability and risk in the second part. A summary of the results is contained in the conclusion.

The paper focuses on capital market integration at sovereign bond market in eleven selected euro zone countries (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, and Spain). The first main objective is to test the degree of capital market integration before and after the crisis using Germany as a benchmark country and also among them as well. Secondly it evaluates and provides reasons of capital integration in time. The examination is applied through i) sigma convergence ii) yield spreads iii) correlation matrix iv) cointegration tests. I found almost zero yield differences before crisis. After 2008 results show segmentation in euro zone countries with certain special characteristic for countries with high credit ratings.

Made available in DSpace on 2016-04-26T20:48:41Z (GMT). No. of bitstreams: 1 Daniel Barbosa Garzillo.pdf: 7742102 bytes, checksum: ccc529c50af11e38fc9bcc6b79167656 (MD5) Previous issue date: 2014-11-28 / Despite being an important variable for development of economies, by financing expenditure and investment projects, the credit market is few developed in Brazil when compared to the most developed countries. This fact seems to be strongly correlated with high spreads and interest rate on bank loans charged by the Brazilian banking sector. The orthodox theory is the one that most deeply study this topic and point to five main reasons as determinants of different credit costs between countries: competition in the banking sector; macroeconomic environment; taxation, reserves requirement and mandated lending; and availability of information about borrowers. Assessing Brazil in the indicated items, there is notable improvement in almost all factors during de 2000s, however, despite of the cutbacks in interest rates and spreads, we can explain only partially the reduction observed and, in addiction, we note that the credit costs in Brazil are still high comparing to other countries. We understand that SELIC may explain the high level of Brazilian credit costs, because beyond affect directly the costs of funding, it represents a high cost of opportunity of offering credit, since SELIC remunerate part of Brazilian treasury bills, which become profitable, low risk and high liquidity assets / Apesar de ser um importante fator para o desenvolvimento das economias por propiciar liquidez ao sistema e financiar consumo e projetos de investimento, o mercado de crédito é pouco desenvolvido no Brasil quando comparado com as principais economias do mundo. Este fato parece ter forte correlação com os elevados spreads e taxas de juros praticadas pelo setor bancário brasileiro. A teoria ortodoxa convencional trata do tema e aponta para cinco principais fatores como determinantes das diferenças de custos de crédito entre os países: grau de competição do setor bancário; ambiente macroeconômico; tributação, requerimento de reservas e empréstimos subsidiados; e disponibilidade de informações sobre os mutuários. Ao avaliar o Brasil nos itens indicados, notamos sensível melhora em praticamente todos os fatores durante os anos 2000, entretanto, apesar das reduções das taxas de juros e spreads, consegue-se explicar apenas parte da queda verificada e, além disso, notase que os custos de crédito no Brasil ainda são elevados em relação a outros países. Entendemos que a taxa SELIC possa ser a explicação para os patamares ainda elevados dos custos de financiamento no Brasil, pois, além de influenciar diretamente os custos de captação, ela representa, para o setor bancário, um alto custo de oportunidade de se ofertar crédito por ser base para remuneração de parte dos títulos da dívida do governo brasileiro, tornando-os ativos rentáveis, de baixo risco e alta liquidez