Responsiveness of Volatility Analysis of the Jakarta Islamic Index on Macroeconomic Variables

This study aims to analyze the influence and response of the Jakarta Islamic Index (JII) volatility to changes in macroeconomic variables. VECM was used to examine the long-and short-term effects, while IRF was used to analyze the JII response. Data were obtained from BPS, BI, and Yahoo Finance monthly from 2015-2020 using global macroeconomic fiscal variables, including inflation, BI and Exchange Rates, Industrial Production Index, World Oil Price, Malaysia Hijrah Shariah Index, and DJIM Malaysia Titan 25 Index. The results show that JII is influenced by inflation variables, BI rate, IPI, OP, MHS, and DJIM in the long term but not the exchange rate. Furthermore, it is influenced by BI rate, IPI, OP, MHS, and DJIM in the short term, while the exchange rate and inflation have no significant effect. Macroeconomic variable shock influence JII by 52,27% while the rest is influenced by other variables outside the model. This research implies that the JII index is very sensit ive to economic changes.

Volatility Analysis and Visualization of Climate Data Based on Wavelets

In this article, we analyze the real meteorological data recorded by Wenzhou Meteorological Bureau from 1951 to 1997. The data has not been used elsewhere and is available at Meteorological Station Wenzhou (ID: CHM00058659) at https://geographic.org/global_weather/china. We perform the time series volatility analysis including ARMA, ARIMA, ARCH-LM, PARCH, SARMA and Morlet wavelet analysis and use the Mann-Kendall (M-K) test to analyze both the trend and mutation defined by statistics sequence. In addition, a Morete wavelet time-frequency model is established to show that both the precipitation and temperature have a very important 12-month cycle and the precipitation is also very unstable. We then employ the STL, coif1 decompositions and NAR model to capture both the volatility and Heteroscedasticity in the data. In addition, the performance of the fitted model has been proven to be satisfactory on actual climate data with the small Mean Square Error (MSE), Root-Mean-Squarred Error (RMSE), and coefficient of determination. Finally, monthly average temperature is added as an exogenous (covariate) variable and a nonlinear autoregressive exogenous model is employed to improve the performance of the model. Our results show that the performance of NARX model is more accurate and stable with better mean square error.

Impact of MiFID II on the Market Volatility—Analysis on Some Developed and Emerging European Stock Markets

The paper investigates whether the implementation of MiFID II, a packet of financial legislation applying broadly to European Union financial markets, has led to a change in the volatility of some European developed and emerging stock markets. We show that for the developed capital markets considered in the analysis, MiFID II did not lead to a decrease in the volatility of capital markets. On the contrary, for all analysis intervals considered (3 months, 6 months, 12 months, 18 months and 24 months), the impact on volatility is positive, with volatility increasing in the case of the FTSE 100, CAC40 and DAX stock indexes. There is a similar significant relationship for the Czech stock market, but only over the three-month interval. For the Polish and Romanian stock markets, which enforced MiFID II later, a negative impact of MiFID II on volatility could also be observed. In the Romanian market, MiFID II had a negative impact on volatility on the short-term horizon, while for the Polish market, the impact of MiFID II on volatility is noticeable on a longer term of 24 months.

Challenges in currency derivatives management in the OTC market in Poland during the Covid-19 pandemic

Purpose: The aim of the chapter is to analyze the impact of the Covid-19 pandemic and market volatility increase on risk management in the OTC derivatives market in Poland. Design/methodology/approach: The chapter describes the legal background of derivatives trading with non-financial enterprises, then identifies the main risks, and discusses possible actions of market participants. In this regard, the study conducts volatility analysis based on selected market data. Findings: Due to volatility increase and the resulting negative valuation of non-matured currency derivatives by Polish exporters, margin call clauses were triggered, entailing the need to post additional collateral or prematurely close contracts. The described situation is particularly difficult when the pre-settlement limit is fully utilized on deal date, usually in the case of long-lasting large open exposures in non-flexible transactions. Research implications: To determine market risk, studies often apply the VaR approach. Inthis way, the specific amount of risk is analyzed on adaily basis and used by banks both to determine the maximum amount of the contract and to control pre-settlement risk. Apart from many advantages of the VaR approach, there are some drawbacks, especially related to volatility estimation, which usually relies on historical market fluctuations. It may cause that the risk will not be properly valued under crisis conditions. In such situations, supplementary methods should be also implemented (stresstests). Practical implications: Under high market volatility, preventive actions should be prepared in advance, including treasury limit increase, additional funds for collaterals, or contracts modification (flexible products should be considered).Originality and value: The study covers a challenge that banks face, which is rarely described in professional literature but very serious for bank management. Under normal market conditions, if the margin call clause appears and no additional collateral is posted, the transaction should be closed to limit the counterparty’s loss. However, this type of action during the pandemic may impose the risk of force majeure. From the company perspective, using such instruments threatens their early settlement and the need to finance closeout amount.

Correction to: Applying multivariate-fractionally integrated volatility analysis on emerging market bond portfolios

An amendment to this paper has been published and can be accessed via the original article.