International finance

Enrique Sentana, 16 September 2016

Determining which risks are worth taking is one of the key problems facing financial market participants. Central to this is the time-varying nature of volatility. This column examines the Chicago Board Options Exchange volatility index, VIX, which has become the standard measure of volatility risk. Complementary approaches to pricing VIX derivatives are considered, and the tumultuous economy since the Great Recession is used to assess the empirical performance of the different models.

Pasquale D'Apice, 13 September 2016

There has been renewed interest in economic analysis of the EU budget following the Global Crisis. This column presents new calculations of cross-border flows operated through the EU budget and compares them with those estimated for the US. For each euro paid by an average net (EU member state) contributor, approximately 75 cents return through the EU budget, and 25 cents cross a border. At the margin, the US federal budget is less redistributive in normal times, with around 90 cents per dollar returning to the contributing state, but net cross-border fiscal flows in the US increased steeply in the wake of the Global Crisis, financed by federal borrowing.

Vítor Constâncio, Philipp Hartmann, 01 September 2016

The ECB’s 2016 Sintra Forum on Central Banking focused on the international monetary and financial system. In this column, the organisers of the forum highlight some of the main points from the discussions, including concerns that the world economy may be suffering from a shortage of safe assets and proposals for which areas international regulatory reforms should be further developed. 

Simon Evenett, Johannes Fritz, 30 August 2016

In July, G20 trade ministers adopted nine 'Guiding Principles for Global Investment Policymaking'. This column introduces the latest GTA report, which shows how well the G20’s track record stacks up against these new growth-promoting goals.

Ina Simonovska, Joel David, 26 August 2016

The ‘excess co-movement puzzle’ in financial markets refers to the correlation of asset returns beyond what could be expected based on the common movements in fundamentals. Using international data, this column links excess co-movement in firm-level stock returns to the correlated beliefs of sophisticated investors. Co-movement is largely explained by investors’ reliance on common information – in other words, their lack of firm-specific information. This gives rise, in part, to the higher degree of aggregate market-wide volatility.

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