Essays in FX market microstructure

The thesis presents three papers in the field of international finance and provides a study of the foreign exchange (FX) market from a microstructure perspective. From the empirical identification of a common component in liquidity across currencies, referred to as FX market liquidity, the thesis investigates its asset pricing implications, determinants and cross-market dynamics. The first paper is an empirical study of global liquidity risk in the FX market. Estimating liquidity with the Pastor-Stambaugh measure originally developed for the stock market, the paper documents strong liquidity commonality across currencies. Given this observation, it estimates a measure of global FX liquidity risk and shows that the risk is priced in the cross-section of currency returns. It finally evaluates the associated risk premium at around 4.7 percent per annum. The second paper provides an empirical analysis of the determinants of the time variation in FX market liquidity documented in the first paper. Employing two measures of liquidity, transaction costs and the Pastor-Stambaugh measure from the first paper, the study finds a significant role of traditional determinants, such as global volatility, market returns and seasonality, and of funding liquidity constraints to explain both aspects of market liquidity. Finally, the third paper is an empirical investigation of illiquidity linkages across the FX and US stock markets. Focusing on transaction costs, the paper finds strong evidence of co-movement, especially during the recent financial crisis. In this respect, illiquidity contagion across the two markets is documented. Given dealers' role as liquidity providers in both markets, their trading behaviour may have significant implications for cross-market liquidity dynamics. Indeed, focusing on the potential sources of the observed cross-market linkages, transaction costs are found to be strongly related to the liquidity supplied to the financial system

ROS signaling as common element in low oxygen and heat stresses

The activation of the oxidative metabolism in plants under low oxygen conditions has prompted controversial views. The presence of a ROS component in the transcriptome in response to low oxygen has been observed and an overlap with heat stress has been proved. It has been also demonstrated that ROS are produced during both anoxia and heat, but the site of their production remain contentious. Membrane NADPH oxidase and mitochondrial electron transport flow have been indicated as possible ROS generation systems. Both anoxia and heat have been shown to induce the transcription of Heat Shock Factors (HSFs) and Heat Shock Proteins (HSPs), among which HSFA2 and some of its targets. HSFA2 over-expressing plant has been shown to be more tolerant to anoxia, while the knockout hsfa2 lose the capability of wild type plants to cross-acclimate to anoxia through mild heat pre-treatment. The production of ROS seems to be an integral part of the anoxia and heat response, where HSFs likely play a central role in activating the HSP pathway. This mechanism is suggested to result in enhanced plant tolerance to both anoxia and heat

Credit Default Swap Spreads: Funding Liquidity Matters!

This paper explores the relationship between funding liquidity and credit default swap (CDS) spreads, evidencing the effects of the regulatory changes brought about by the introduction of the CDS Small Bang reforms for CDS contracts on European reference entities in June 2009. Using panel estimations, this study provides evidence that a tightening of funding liquidity increases CDS spreads, an effect which is three times larger in magnitude for high-CDS entities compared to low-CDS firms. This relationship increases in magnitude and significance after the implementation of the CDS Small Bang reforms which introduced fixed coupons for trading CDSs, leading to the exchange of upfront fees between CDS contract parties

The Rise of Regional Financial Cycle and Domestic Credit Markets in Asia

This paper documents the emergence of a regional financial cycle in Asia, evidenced by commonality in regional bank flows, and its impact on domestic credit. Using a dataset of 24,169 non-financial Indian firms for the period 2001-2019, we establish that the regional financial cycle has a positive and significant impact on domestic corporate debt, as opposed to an insignificant effect on foreign currency corporate debt, after controlling for the global financial cycle. We find that both interbank markets and monetary policy conditions in the region act as transmission channels for this effect. We show that transparent firms which have lower monitoring costs are relatively more exposed to the regional financial cycle, suggesting that affiliates of foreign banks play an important role. However, the exposure of domestic credit markets reduces once regulators institute more stringent policy actions such as macroprudential policies, selective capital controls and floating currency regimes

Reactive oxygen species-driven transcription in Arabidopsis under oxygen deprivation

Reactive oxygen species (ROS) play an important role as triggers of gene expression during biotic and abiotic stresses, among which is low oxygen (O2). Previous studies have shown that ROS regulation under low O2 is driven by a RHO-like GTPase that allows tight control of hydrogen peroxide (H2O2) production. H2O2 is thought to regulate the expression of heat shock proteins, in a mechanism that is common to both O2 deprivation and to heat stress. In this work, we used publicly available Arabidopsis (Arabidopsis thaliana) microarray datasets related to ROS and O2 deprivation to define transcriptome convergence pattern. Our results show that although Arabidopsis response to anoxic and hypoxic treatments share a common core of genes related to the anaerobic metabolism, they differ in terms of ROS-related gene response. We propose that H2O2 production under O2 deprivation is a trait present in a very early phase of anoxia, and that ROS are needed for the regulation of a set of genes belonging to the heat shock protein and ROS-mediated groups. This mechanism, likely not regulated via the N-end rule pathway for O2 sensing, is probably mediated by a NADPH oxidase and it is involved in plant tolerance to the stress

Prime Money Market Funds Regulation, Global Liquidity, and the Crude Oil Market

This paper explores how the 2016 US Prime Money Market Funds (PMMFs) regulation affected the crude oil market. This reform led to an increase in short-term dollar borrowing costs and the oil sector became particularly susceptible to disruptions in the global funding market due to a post-financial crisis debt expansion which far outpaced other commodity industries. Building on the global crude oil market SVAR model pioneered by Kilian and Murphy (2014), we find that tighter PMMFs funding conditions have a lagged negative effect on the real price of crude oil and a lagged positive effect on oil production. We show that these responses are driven primarily by a fall in certificates of deposits issued by global banks. Lastly, we evidence that the US nominal effective exchange rate acts as a transmission channel for the negative funding shock to the real price of oil

Fisiopatologia e trattamento dell'iperparatiroidismo primario

Abstract non disponibil

How does standardization affect OTC markets? Evidence from the Small Bang reform in the CDS market

Focusing on the most liquid segment of the European CDS market, this paper studies the impact of key standardization reforms. We document that the introduction of an upfront fee to standardize the cash flow of CDS contracts created an initial capital cost for traders, leading to higher CDS prices. This relation holds after accounting for well-known determinants of spreads, suggesting a separate funding channel driven by the greater capital intensity of trading. This effect is stronger when dealers are likely to bear the initial capital cost and is present across all industries, except for swaps written on financials

FX market liquidity, funding constraints and capital

We investigate the determinants of the time variation of the common component of FX market liquidity across developed and emerging market currencies. We study the impact of funding liquidity constraints, which proxy for supply considerations, and capital flows, which proxy for demand considerations of liquidity on transaction costs. Our results show that (i) funding liquidity constraints measured by the availability of outstanding repos reduce FX market liquidity, and their impact is stronger when they are associated with an increase in the costs of funding and a shortening of their maturity; (ii) increasing capital flows at the global level increase liquidity; (iii) both of these effects were stronger during the recent financial crisis, when liquidity dry-ups were severe; and (iv) the analysis of individual currencies with diverse riskiness confirms that a shock to speculator capital would lead to a reduction in market liquidity through a spiral effect that is stronger for more volatile currencies. Furthermore, we find a similar effect related to capital flow