Kent Centre for Finance

Dr. Ortenca Kume presented a working paper titled “Causality relationship between bond ratings and credit spreads” at the International Conference of the Financial Engineering and Banking, June 2014 .

Professor Radu Tunaru, Co-Director of Kent Centre for Finance presented a research study ‘Trading Inefficiencies in CDS Markets and Their Determinants’ at a prestigious research meeting held at Bloomberg, London on 2 July 2014. The seminar was organised by Prof. Roman Matousek from the Kent Centre for Finance (KCF) and The Financial Intermediation Network of European Studies (FINEST). The research seminar was attended by leading international experts in the area of Banking and Finance including Dr. Adam Farkas, Executive Director of European Banking Authority.

Dr. Ekaterini Panopoulou presented the paper “Declining discount rates and the Fisher Effect: Inflated past, discounted future?” (co-athored by M. Freeman, B. Groom and T. Pantelidis) and Dr Nikolaos Voukelatos presented a working paper examining the tendency of investors to herd when trading in the US options market at the International Conference of the Financial Engineering and Banking Society (F.E.B.S), University of Surrey, Guildford,

Dr. Ekaterini Panopoulou has presented at the International Association for Applied Econometrics 2014 Annual Conference at Queen Mary University, the paper “Out-of-Sample Equity Premium Prediction: A Complete Subset Quantile Regression Approach” (co-authored by L. Meligkotsidou, I. Vrontos and S. Vrontos).

Dr Nikolaos Voukelatos had a working paper presented at the 2014 FMA European Conference at Maastricht in June 2014. The paper examines the effects of tick size changes on the liquidity of options markets.

Prof. Radu Tunaru has presented his paper on Dividend Derivatives at the 23^rd European Financial Management conference in Rome. Professor Tunaru is a Fellow on the board of EFMA and was also part of the conference programme committee.

Dr. Silvia Stanescu was invited to speak at the 2014 ICBI Global Derivatives Conference, a prestigious quantitative finance practitioners’ conference, where she presented recent joint work with Professor Radu Tunaru on investment strategies with volatility derivatives.

In the first part of the presented study, the authors analyse the performance of various portfolios mixing equity with bonds but also considering volatility futures. The analysis was carried out comparatively for US using VIX futures and also for the Eurozone where VSTOXX futures were employed. The results point out that the best portfolio will contain a large proportion of equity, a smaller proportion of bonds and also of volatility index futures. The key finding here is that bonds will help investors in periods of liquidity pressure while volatility futures will help to insulate the portfolio against temporary market crashes and systemic shock events. In the second part of the study, the authors identify a statistical arbitrage opportunity between the VIX and VSTOXX futures markets. The analysis is based on a unique data set, comprising the synchronous daily time-series of VIX and VSTOXX futures prices, which was compiled with help from Eurex. The in-sample results show that the VIX-VSTOXX (futures price) difference is significantly negative, in effect that there was more volatility in the Eurozone than in US. This relationship may change in the future but the statistical methodology presented in the paper along with the proposed trading strategies can be applied the same way.

The presented study is available here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2351427.

Dr Jaideep Oberoi has recently presented a paper titled ‘Component Value at Risk Models with Countercyclical Adjustments for Improved Economic Performance’ at the Computational and Financial Econometrics conference in London.

Dr Jaideep Oberoi and Dr Pradip Tapadar have received a grant from the University of Waterloo for a workshop on “Demographic Structure and Asset Prices” under the University of Waterloo International Partnership Programme.

Dr Jaideep Oberoi and Dr Pradip tapadar have  been awarded a grant from the Society of Actuaries US to carry out research on the Risks to Equity Prices from Baby Boomer retirements.