Extreme Returns without News: A Microstructural Explanation

What triggers extreme exchange-rate returns? Though news is the source of volatility in standard theoretical models, in reality volatility is often unrelated to news. This paper shows that extreme exchange-rate returns -- and, more generally, high kurtosis of returns -- are statistically inevitable even in the absence of news. We identify four microstructural sources of return kurtosis in price-contingent order flow: (1) high kurtosis in the distribution of price-contingent order sizes; (2) clustering of price-contingent order executions at certain times of day; (3) clustering of order executions at certain price levels; and (4) the tendency of positive-feedback trading to propagate trends. Using simulations calibrated to price-contingent orders placed at a major foreign exchange dealing bank we show that when each factor operates in isolation, the one that contributes most to kurtosis in returns is kurtosis in the order-size distribution. When the factors operate simultaneously, however, their interactions prove far more important. Extreme returns in the absence of news should be viewed as natural rather than anomalous.kurtosis, exchange rates, order flow, high-frequency, microstructure, jump process, value-atrisk, risk management

Extreme Returns: The Case of Currencies

This paper investigates how active price-contingent trading contributes to extreme returns even in the absence of news. Price-contingent trading, which is common across financial markets, includes algorithmic trading, technical trading, and dynamic option hedging. The paper highlights four properties of such trading that increase the frequency of extreme returns, and then estimates the relative of these properties using data from the foreign exchange market. The four key properties we consider are: (1) high kurtosis in the distribution of order sizes; (2) clustering of trades within the day; (3) clustering of trades at certain prices; and (4) positive and negative feedback between trading and returns. Calibrated simulations indicate that interactions among these properties are at least as important as any single one. Among individual properties, the orders’ size distribution and feedback effects have the strongest influence. Price-contingent trading could account for over half of realized excess kurtosis in currency returns.Crash, Fat Tails,Kurtosis,Exchange Rates,Order Flow,High-Frequency,Microstructure,Jump Process,Value-At-Risk,Risk Management

Asymmetric Information and the Foreign-Exchange Trades of Global Custody Banks

This paper provides the first rigorous empirical analysis of markups on custodial foreign exchange trades. It finds that they substantially exceed relevant benchmarks such as interbank half-spreads. We trace this to an information asymmetry -- custodial bank dealers know more about their prices and bid-ask spreads than their client funds. We also examine the asset managersÂ’ continued heavy reliance on this high-cost approach to trading when alternatives are available with lower markups. We provide evidence that this choice does not reflect ignorance of the cost differential. Analysis relies on the complete foreign exchange trading record of a mid-sized global custody bank during calendar year 2006.

Exchange Rate Response to Macro News: Through the Lens of Microstructure

This study investigates the micro effects of macro news using customer price-contingent orders (i.e. stop-loss and take-profit orders) data from a large foreign exchange dealing bank in the pound/dollar market. Results reveal that price-contingent order placement intensifies 3 to 5 hours prior to the news events. I examine the link between this surge in order placement and the exchange-rate jump following the announcement. I find that price-contingent orders can enhance our ability to explain post-release exchange-rate returns by half. Furthermore, the estimated effect of orders is orthogonal to the news surprises. This implies that there may be a component of the news response that purely reflects institutional features such as order types and not necessarily the public information itself.

CEO incentives and bank risk over the business cycle

We examine whether the relationship between managerial risk-taking incentives and bank risk is sensitive to the underlying macroeconomic conditions. We find that risk-taking incentives provided to bank executives are associated with higher bank riskiness during economic downturns. We attribute this finding to the increase in moral hazard during macroeconomic downturns when the perceived probability of future bailouts and government guarantees rises. This association is particularly strong for larger banks, banks that maintain lower capital ratios and banks that are managed by more powerful Chief Executive Officers (CEOs). Our findings highlight the importance of the interaction between managerial incentives and the macroeconomic environment. Boards and regulators may find it useful to consider the countercyclical nature of the relationship between risk-taking incentives and bank riskiness when designing managerial compensation.acceptedVersio

Managerial performance incentives and firm risk during economic expansions and recessions

We argue that the relationship between managerial pay-for-performance incentives and risk taking is pro-cyclical. We study the relationship between incentives provided by stock-based compensation and firm risk for US non-financial corporations over the two business cycles between 1992 and 2009. We show that a given level of pay-for-performance incentives results in significantly lower firm risk when the economy is in a downturn. The documented pro-cyclical relationship between incentives and risk taking is consistent with state-dependent risk aversion. Our findings contribute to the literature on the depressive effects of performance incentives on firm risk by documenting the importance of the interaction between performance incentives and risk aversion. © The Authors 2017

Ocjena apsorpcije, djelotvornosti protiv bakterije Escherichia coli i citotoksičnosti krutih lipidnih nanočestica s moksifloksacinom

Moxifloxacin (MOX) is an important antibiotic commonly used in the treatment of recurrent Escherichia coli (E. coli) infections. The aim of this study was to investigate its antibacterial efficiency when used with solid lipid nanoparticles (SNLs) and nanostructured lipid carriers (NLCs) as delivery vehicles. For this purpose we designed two SLNs (SLN1 and SLN2) and two NLCs (NLC1 and NLC2) of different characteristics (particle size, size distribution, zeta potential, and encapsulation efficiency) and loaded them with MOX to determine its release, antibacterial activity against E. coli, and their cytotoxicity to the RAW 264.7 monocyte/macrophage-like cell line in vitro. With bacterial uptake of 57.29 %, SLN1 turned out to be significantly more effective than MOX given as standard solution, whereas SLN2, NLC1, and NLC2 formulations with respective bacterial uptakes of 50.74 %, 39.26 %, and 32.79 %, showed similar activity to standard MOX. Cytotoxicity testing did not reveal significant toxicity of nanoparticles, whether MOX-free or MOX-loaded, against RAW 264.7 cells. Our findings may show the way for a development of effective lipid carriers that reduce side effects and increase antibacterial treatment efficacy in view of the growing antibiotic resistance.Moksifloksacin je važan antibiotik koji se često rabi za liječenje rekurentne infekcije bakterijom Escherichia coli (E. coli). Cilj je ovog istraživanja bio ocijeniti njegovu djelotvornost u formulaciji s krutim lipidnim nanočesticama (engl. solid lipid nanoparticles, krat. SNL) i nanostrukturiranim lipidnim nosačima (engl. nanostructured lipid carriers, krat. NLC) kao njegovim vehikulima. U tu smo svrhu osmislili dva SLN-a (SLN1 I SLN2) te dva NLC-a (NLC1 i NLC2) različitih svojstava (veličine čestice, raspodjele veličina, zeta potencijala i sposobnosti enkapsulacije) te ih obogatili moksifloksacinom kako bismo utvrdili njegovo otpuštanje, djelovanje protiv E. coli i citotoksičnost za makrofagnu staničnu liniju RAW 264.7 in vitro. S bakterijskom apsorpcijom od 57,29 %, SLN1 se pokazao značajno djelotvornijim vehikulom moksifloksacina od njegove standardne formulacije (otopine), a formulacije s SLN2, NLC1 odnosno NLC2 s odgovarajućim apsorpcijama od 50,74 %, 39,26 % odnosno 32,79 % iskazale su djelotvornost sličnu onoj standardnog antibiotika. Test citotoksičnosti nije pokazao značajnu toksičnost nanočestica bez obzira na to jesu li sadržavale moksifloksacin ili nisu. Naši rezultati upućuju na mogući smjer razvoja djelotvornih lipidnih nosača kojima bi se mogle smanjiti nuspojave i povećati antibakterijska djelotvornost liječenja s obzirom na sve veću bakterijsku rezistentnost

Knowledge and attitudes of high school students about AIDS: A Turkish perspective

This study was conducted with 705 high school students (360 ninth graders and 345 11th graders; 305 female, 400 male) for the purpose of determining their knowledge and attitudes about HIV/AIDS. Data were obtained using a self-completed questionnaire. The questionnaire was divided into three sections. Section A included questions about descriptive characteristics of the students. Section B included questions about HIV/AIDS knowledge. Section C included questions about students' attitudes towards AIDS and their information sources. The percentage, correlation, and one-way analysis of variance were used for data analysis. Research findings showed moderate knowledge levels (59.15 +/- 14.22 out of 100 points) in a sample group of 705 Turkish high school students on all AIDS-related questions. Students in private schools had higher scores than those in public schools; boys had higher scores than girls; 11th graders had higher scores than ninth graders, and the methods of transmission were better known than methods of nontransmission. Scores increased in parallel with student age. Knowledge scores of students were also positively correlated with a higher level of parent education and the ease with which sexuality-related subjects were discussed at home. About half of the students believed that people with HIV/AIDS should be able to attend school and should not have to stop working. Most of the students were informed about HIV/AIDS by media. To prevent the illness, the most important role of the nurses is to focus on education and information for individuals, families, and communities