Current Issue : April - June Volume : 2021 Issue Number : 2 Articles : 6 Articles
We present a solution to the problem posed by Zhang et al. [1] regarding Call Option price CT under linear investment hedging for the stochastic interest rate modeled by a CIR Process. A closed form representation for CT by expected value of the path-integral along a square functional of n-dimensional Ornstein-Uhlenbeck process is derived. The method is suitable for Monte-Carlo simulation and illustrated by an example....
The global economy has taken a major hit due to the grave effect of the spread of COVID-19. Developed countries are struggling to sustain their economies and this gives an indication of the current state of developing and underdeveloped nations. The closure of businesses and the laying off of some workers, coupled with the closure of some international air and sea ports indicates the stagnation of global economic growth and process with a forecasted massive recession. The local governments of various countries have collectively inputted strategic efforts to supplement the situation with diverse financial relief funds and fiscal assistance policies. The GDP of the global economy is predicted to shrink by 5.2% according to the minimum economic forecast predictions (World Bank, 2020). The severity of the pandemic will undoubtedly leave a negative and uninspiring blueprint on the face of the global economy. The pandemic like a binocular has exposed the multifaceted cracks in the various economy sectors and their unpreparedness for global storms such as this. Foreign Direct Investment and foreign exchange inflows into the continent of Africa have been stable on average over the years; however, the current state of the global economy predicts a sharp fall which will not easily recover until there has been a full recovery. This gives a baseline forecast of the adverse effect of the pandemic on the African soil as well as other developing and underdeveloped countries and regions globally. Therefore, various governments within the continent must develop and implement breakwater policies such as intra-regional integrations as well as strong international relations that will help hedge against and cushion the effect of another global storm. This paper seeks to analyze the effect of the pandemic on the global economy, a case study of its influence on Africa’s FDI and foreign exchange inflows....
We study the relationship between Credit Risk Management and the performance of financial institutions in South Sudan using measures of institutional performance and Credit Risk Management. Using the ARDL model, we establish compliance with the basel accord significantly affecting the performance of finance institutions while monitoring corporate credit risk and risk management environment seem not to significantly exact influence the performance of financial institutions in South Sudan. On the other hand, credit risk operational practices seem to negatively and insignificantly affect the performance of financial institutions in the country....
The presence of risk premium is an issue that weakens the rational expectation hypothesis. This paper investigates changing behavior of time varying risk premium for holding 10 year maturity bond using a bivariate VARMA-DBEKK-AGARCH-M model. The model allows for asymmetric risk premia, causality and co-volatility spillovers jointly in the global bond markets. Empirical results show significant asymmetric partial co-volatility spillovers and risk premium exist in the bond markets. The estimates of the bivariate risk premia show bi-directional causality exist between the Australia and France Bond markets. Overall results suggest nonexistence of pure rational expectation theory in the risk premium model. This information is useful for the agents’ strategic policy decision making in global bond markets....
The invention of the Internet has paved the way for a new world of opportunities in life, including finance. Even with the presence of this invention, the traditional financial system has failed to meet expectations set up by other technological advancements. In today’s world, almost everyone has access to the Internet, yet not all of them have bank accounts. According to a recent report from the World Bank Group, approximately 1.7 billion people worldwide still do not have any access to banks whatsoever. Although the Internet has helped transfer information from one part of the world to another within milliseconds, time and spending are still needed when it comes to financial assets. In the last few years, a growing trend toward decentralization in the financial system has been stimulated by blockchain and technological innovation. Satoshi and his unique invention, Bitcoin Blockchain, started to call for peer-to-peer transactions without intermediaries or centralization of any kind. Six years later, the invention of another blockchain, Ethereum, came into existence and has become the backbone of promising decentralized finance (DeFi). This paper provides an overview of blockchain technology, discussing the DeFi ecosystem and its possibilities regarding financially including the unbanked and improving the current financial system....
Although the Federal Reserve’s quantitative easing of early 2020 was comparable in scale to 2008-2009, the implications for the growth of money in circulation and future inflationary pressures appear quite different. Absent the unprecedented surge in bank excess reserve ratios seen in 2008 and after, massive monetary base increases imply the possibility of a much larger, and potentially worrisome, increase in the money in circulation. Rising inflation expectations are implied by such phenomena as the surging demand for Treasury Inflation Protected Securities and record highs for gold prices during the summer of 2020. These trends lend some support to market participants evincing concern that the surging money growth is, in fact, a precursor to future inflation. Historical perspective on the 2020 situation is provided by data from the time of the 1918-1919 Spanish flu and available documentation of inflation following medieval and Roman-era pandemics. Indications of extra upward pressure on prices arising from pent-up spending after the epidemic has passed include the surge in bank loans in the aftermath of the 1918-1919 Spanish Flu pandemic....
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