Modelling multivariate financial time series using copulas. What are the chances that the losses in the market value of investments exceed the anticipated levels? Given that one country's financial market collapsed, what are the chances that it would lead to financial crises in other countries? These questions often arise in risk management and international finance. This project takes a significant step forward from the existing literature to develop new flexible and innovative methods to an ....Modelling multivariate financial time series using copulas. What are the chances that the losses in the market value of investments exceed the anticipated levels? Given that one country's financial market collapsed, what are the chances that it would lead to financial crises in other countries? These questions often arise in risk management and international finance. This project takes a significant step forward from the existing literature to develop new flexible and innovative methods to answer the foregoing type of questions. Further, this project proposes new measures of market risks that are suitable for communicating to the broader public as well as the experts.Read moreRead less
Understanding and Modelling Weather Derivatives in Australia for the Purpose of their Accurate Pricing: a Statistical and Econometric Investigation. Australia suffers some of the most adverse and extreme weather globally. Its government and industries, especially agriculture and electricity, stand to benefit from improved understanding of weather derivatives and capability to price them accurately. Tailored to Australian weather scenarios, weather derivatives will be tools to manage local risk f ....Understanding and Modelling Weather Derivatives in Australia for the Purpose of their Accurate Pricing: a Statistical and Econometric Investigation. Australia suffers some of the most adverse and extreme weather globally. Its government and industries, especially agriculture and electricity, stand to benefit from improved understanding of weather derivatives and capability to price them accurately. Tailored to Australian weather scenarios, weather derivatives will be tools to manage local risk factors, and increase global competitiveness by hedging against competitors' good weather-related advantage. The US weather derivative market, capitalised at over US$7.5b, began just 7 years ago; there is no organised Australian market. This project's smart techniques for improving pricing accuracy will support the development and vigorous growth of a local market.Read moreRead less
Novel econometric techniques for dealing with point processes in high frequency financial data with applications to financial risk management. The recent global financial crisis highlighted the inherent risk involved in investing in financial assets. This project aims to develop novel statistical methods for forecasting the onset of instability in asset prices. The outcomes of this research will lead to improvements in the management of financial risk.
Modelling Dynamic Correlations in the Volatility of Patents and Technical Change. National/community benefits include a clearer understanding of the relation between patents and industrial innovation, measuring the effects of patents on technical change, economic growth and job creation, and analysing their fluctuations over time. The project analyses the variability in technological innovations, measures the impact of innovations on total output and key factors of production, namely labour, cap ....Modelling Dynamic Correlations in the Volatility of Patents and Technical Change. National/community benefits include a clearer understanding of the relation between patents and industrial innovation, measuring the effects of patents on technical change, economic growth and job creation, and analysing their fluctuations over time. The project analyses the variability in technological innovations, measures the impact of innovations on total output and key factors of production, namely labour, capital, energy and materials, and emphasizes the usefulness of the results. Expected outcomes include changing current ideas regarding output generation, understanding broad issues underlying patents and their variability, advancing multi-disciplinary knowledge, using information intelligently and promoting a culture of innovation.Read moreRead less
Risk management with real-time financial and business conditions indicators. This project will develop new methods that combine financial and macroeconomic information that arrives at different intervals to better understand the implications of this information for risk management and policy decision-making. This will support better risk management strategies especially when economic conditions are very volatile.
Forecasting with single source of randomness state space models. The framework developed in this project, for identifying and
extrapolating trends, seasonal patterns and economic cycles in time
series, has a large and diverse range of useful applications in
Australia. Some examples include its potential use in the
development of appropriate monetary policy, its use to better inform
finance markets of risk levels associated with shares, its use to
forecast demand in supply chains to provide ....Forecasting with single source of randomness state space models. The framework developed in this project, for identifying and
extrapolating trends, seasonal patterns and economic cycles in time
series, has a large and diverse range of useful applications in
Australia. Some examples include its potential use in the
development of appropriate monetary policy, its use to better inform
finance markets of risk levels associated with shares, its use to
forecast demand in supply chains to provide a better service to
customers, and its use in call centres to better tailor staff
schedules to meet customer calls.Read moreRead less
Managing the risk of price spikes, dependences and contagion effects in australian electricity markets. Australian electricity markets are more volatile and spike-prone than other comparable markets. Price spikes account for large parts of total price variation, and companies that are unprepared to manage these risks adequately face potentially substantial losses. The economic reality of price spikes in our interconnected electricity markets which are small and geographically isolated, unlike th ....Managing the risk of price spikes, dependences and contagion effects in australian electricity markets. Australian electricity markets are more volatile and spike-prone than other comparable markets. Price spikes account for large parts of total price variation, and companies that are unprepared to manage these risks adequately face potentially substantial losses. The economic reality of price spikes in our interconnected electricity markets which are small and geographically isolated, unlike the proximate markets of Europe and North America, emphasises the imperative of this Australian-focused research. Results will enable forecasting of extreme prices and enable market participants to manage better their risks, in Australia's unique electricity environment, and reduce chances of large losses or default.Read moreRead less
When Markets Fail: A Comparative Assessment of Costs and Benefits of Trade Interruption. Stock exchanges worldwide provide the opportunity to instantaneously and continuously trade securities. The introduction of automated trading systems has considerably enhanced this opportunity. Surprisingly, exchanges still have (and use) the discretion to occasionally suspend trading in certain stocks. These trading halts are used to prevent a disorderly or uninformed response to pertinent company informati ....When Markets Fail: A Comparative Assessment of Costs and Benefits of Trade Interruption. Stock exchanges worldwide provide the opportunity to instantaneously and continuously trade securities. The introduction of automated trading systems has considerably enhanced this opportunity. Surprisingly, exchanges still have (and use) the discretion to occasionally suspend trading in certain stocks. These trading halts are used to prevent a disorderly or uninformed response to pertinent company information releases. Practitioners and academics tend to believe that trading halts do not serve this role well. We propose a new methodology to more accurately measure the costs and benefits of trade suspensions. We compare their impact on different trading systems, and evaluate their intertemporal performance.Read moreRead less
Change Detection in Causal Relationships and Measurement of Systemic Risk. Empirical measures of interconnectedness between financial institutions based on tests of Granger causality are currently used in detecting systemic risk. However, researchers need to define periods of calm and stress exogenously in order to implement these tests appropriately. This project aims to develop a new procedure to identify changes in causal relationships and the timing of these changes. The new approach has the ....Change Detection in Causal Relationships and Measurement of Systemic Risk. Empirical measures of interconnectedness between financial institutions based on tests of Granger causality are currently used in detecting systemic risk. However, researchers need to define periods of calm and stress exogenously in order to implement these tests appropriately. This project aims to develop a new procedure to identify changes in causal relationships and the timing of these changes. The new approach has the potential to be a significant improvement in the real-time identification of emerging turmoil in financial markets and provide an improved method for the detection of systemic risk. The new test procedure will be implemented using data for financial and non-financial institutions across Europe, the US and Australia.Read moreRead less
The impact of payout policy changes on firm value and short selling activities across different taxation regimes. Brealey et al (2011) assert that we don't know enough yet about how payout policy varies across firms. This project examines the information content of dividend changes and repurchase programs and the long-term market impact of these announcements, controlling for the substitution effect of repurchases/dividends in different institutional/tax regimes. This project also examines wheth ....The impact of payout policy changes on firm value and short selling activities across different taxation regimes. Brealey et al (2011) assert that we don't know enough yet about how payout policy varies across firms. This project examines the information content of dividend changes and repurchase programs and the long-term market impact of these announcements, controlling for the substitution effect of repurchases/dividends in different institutional/tax regimes. This project also examines whether short sellers manifest abnormal behaviour around the announcement of dividend changes and repurchase programs, and whether earnings are manipulated upwards to maintain the dividend or downwards prior to the announcement of repurchase programs. The findings will be of major interest to academics, managers, investors and regulators.Read moreRead less