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Limited By:	Author = Conlon, Thomas;

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Displaying Results 1 - 15 of 15 on page 1 of 1

Marked Mark

Alternative risk management: correlation and complexity (2009)

Conlon, Thomas

Alternative risk management: correlation and complexity (2009)

Conlon, Thomas

Abstract:

In recent years, spatiotemporal synchronisation within systems with multiple interacting components (Complex Systems), such as financial data, electroencephalographic (EEG) recordings and magnetoencephalographic (MEG) recordings, has been studied extensively, using the equal-time cross-correlation matrix. These Complex Systems are characterised by events such as Market Crashes or Seizures, which are associated with periods of hypersynchronisation. In this Thesis, the Risk Characterisation and Reduction of Complex Systems is studied, using the Cross-Correlation matrix to condense the system complexity. The systems studied display interactions between multivariate time series of varying granularities, including low frequency (Hedge Fund returns), medium frequency (Daily Stock returns) and high frequency (Intraday Stock returns & EEG seizure data). The information content of the correlation matrix between low-frequency Hedge Fund returns is investigated for the first time using Ra...

http://doras.dcu.ie/14836/

Marked Mark

An empirical analysis of dynamic multiscale hedging using wavelet decomposition (2011)

Conlon, Thomas; Cotter, John

An empirical analysis of dynamic multiscale hedging using wavelet decomposition (2011)

Conlon, Thomas; Cotter, John

Abstract:

This paper investigates the hedging effectiveness of a dynamic moving window OLS hedging model, formed using wavelet decomposed time-series. The wavelet transform is applied to calculate the appropriate dynamic minimum-variance hedge ratio for various hedging horizons for a number of assets. The effectiveness of the dynamic multiscale hedging strategy is then tested, both in-and out-of-sample, using standard variance reduction and expanded to include a downside risk metric, the time horizon dependent Value-at-Risk. Measured using variance reduction, the effectiveness converges to one at longer scales, while a measure of VaR reduction indicates a portion of residual risk remains at all scales. Analysis of the hedge portfolio distributions indicate that this unhedged tail risk is related to excess portfolio kurtosis found at all scales.
Science Foundation Ireland
ab,ke,da,SB-08/09/2011

http://hdl.handle.net/10197/3188

Marked Mark

Anatomy of a Bail-In (2014)

Conlon, Thomas; Cotter, John

Anatomy of a Bail-In (2014)

Conlon, Thomas; Cotter, John

Abstract:

To mitigate potential contagion from future banking crises, the European Commission recently proposed a framework which would provide for the bail-in of bank creditors in the event of failure. In this study, we examine this framework retrospectively in the context of failed European banks during the global financial crisis. Empirical findings suggest that equity and subordinated bond holders would have been the main losers from the e535 billion impairment losses realized by failed European banks. Losses attributed to senior debt holders would, on aggregate, have been proportionally small, while no losses would have been imposed on depositors. Cross-country analysis, incorporating stress-tests, reveals a divergence of outcomes with subordinated debt holders wiped out in a number of countries, while senior debt holders of Greek, Austrian and Irish banks would have required bail-in.
Author has checked copyright

http://hdl.handle.net/10197/5614

Marked Mark

Anatomy of a Bail-in (2015)

Conlon, Thomas; Cotter, John

Anatomy of a Bail-in (2015)

Conlon, Thomas; Cotter, John

Abstract:

To mitigate potential contagion from future banking crises, the European Commission recently proposed a framework which would provide for the bail-in of bank creditors in the event of failure. In this study, we examine this framework retrospectively in the context of failed European banks during the global financial crisis. Empirical findings suggest that equity and subordinated bond holders would have been the main losers from the €535 billion impairment losses realized by failed European banks. Losses attributed to senior debt holders would, on aggregate, have been proportionally small, while no losses would have been imposed on depositors. Cross-country analysis, incorporating stress-tests, reveals a divergence of outcomes with subordinated debt holders wiped out in a number of countries, while senior debt holders of Greek, Austrian and Irish banks would have required bail-in.
Science Foundation Ireland

http://hdl.handle.net/10197/7027

Marked Mark

Commodity Futures Hedging, Risk Aversion and the Hedging Horizon (2012)

Conlon, Thomas; Gençay, Ramazan; Cotter, John

Commodity Futures Hedging, Risk Aversion and the Hedging Horizon (2012)

Conlon, Thomas; Gençay, Ramazan; Cotter, John

Abstract:

This paper examines the impact of investor preferences on the optimal futures hedging strategy and associated hedging performance. Explicit risk aversion levels are often overlooked in hedging analysis. Applying a mean-variance hedging objective, the optimal futures hedging ratio is determined for a range of investor preferences on risk aversion, hedging horizon and expected returns. Wavelet analysis is applied to illustrate how investor time horizon shapes hedging strategy. Empirical results reveal substantial variation of the optimal hedge ratio for distinct investor preferences and are supportive of the hedging policies of real firms. Hedging performance is then shown to be strongly dependent on underlying preferences. In particular, investors with high levels of risk aversion and a short horizon reduce the risk of the hedge portfolio but achieve inferior utility in comparison to those with low risk aversion.
Science Foundation Ireland
Names JG 2012-11-16

http://hdl.handle.net/10197/3914

Marked Mark

Credit Default Swaps as Indicators of Bank Financial Distress (2016)

Avino, Davide; Conlon, Thomas; Cotter, John

Credit Default Swaps as Indicators of Bank Financial Distress (2016)

Avino, Davide; Conlon, Thomas; Cotter, John

Abstract:

We examine the ability of CDS contracts written on individual banks to provide market discipline. Changes in CDS spreads are found to represent a robust signal of bank failure, thus providing indirect market discipline. Furthermore, changes in CDS spreads provide information about the condition of banks which supplements that available from equity markets and contained in accounting metrics. Consistent results are detailed for both senior and subordinated CDS spreads. Our results hold for various cohorts, for excess and idiosyncratic changes in CDS and are robust to the use of alternative measures of bank distress, including rating downgrades and accounting risk.
Science Foundation Ireland

http://hdl.handle.net/10197/7454

Marked Mark

Cross-correlation dynamics in financial time series (2009)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Cross-correlation dynamics in financial time series (2009)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Abstract:

The dynamics of the equal-time cross-correlation matrix of multivariate financial time series is explored by examination of the eigenvalue spectrum over sliding time windows. Empirical results for the S&P 500 and the Dow Jones Euro Stoxx 50 indices reveal that the dynamics of the small eigenvalues of the cross-correlation matrix, over these time windows, oppose those of the largest eigenvalue. This behaviour is shown to be independent of the size of the time window and the number of stocks examined. A basic one-factor model is proposed, which captures the main dynamical features of the eigenvalue spectrum of the empirical data. Through the addition of perturbations to the one-factor model, (leading to a market plus sectors model), additional sectoral features are added, resulting in an Inverse Participation Ratio comparable to that found for empirical data.

http://doras.dcu.ie/14964/

Marked Mark

Downside Risk and the Energy Hedger’s Horizon (2012)

Conlon, Thomas; Cotter, John

Downside Risk and the Energy Hedger’s Horizon (2012)

Conlon, Thomas; Cotter, John

Abstract:

In this paper, we explore the impact of investor time-horizon on an optimal downside hedged energy portfolio. Previous studies have shown that minimum-variance hedging effectiveness improves for longer horizons using variance as the performance metric. This paper investigates whether this result holds for different hedging objectives and effectiveness measures. A wavelet transform is applied to calculate the optimal heating oil hedge ratio using a variety of downside objective functions at different time-horizons. We demonstrate decreased hedging effectiveness for increased levels of uncertainty at higher confidence intervals. Moreover, for each of the different hedging objectives and effectiveness measures studied, we also demonstrate increasing hedging effectiveness at longer horizons. While small differences in effectiveness are found across the different hedging objectives, time horizon effects are found to dominate confirming the importance of considering the hedgers horizon. T...

http://hdl.handle.net/10197/3868

Marked Mark

Eurozone bank resolution and Bail-In-Intervention, triggers and writedowns (2015)

Conlon, Thomas; Cotter, John

Eurozone bank resolution and Bail-In-Intervention, triggers and writedowns (2015)

Conlon, Thomas; Cotter, John

Abstract:

The European Union has recently introduced the Single Resolution Mechanism (SRM) to provide a consistent set of rules concerning Eurozone bank resolution. In this study, we retrospectively examine the implications of the SRM for Eurozone banks during the global financial crisis. Empirical results indicate that large, systemically important Eurozone banks would have exclusively required equity writedowns to cover impairment losses. However, to ensure adequate capitalization post bail-in, the majority of large, listed banks would have required conversion to equity for all subordinated and some senior debt creditors. Depositors would not have experienced writedowns in any of the banks examined. Given the subjective nature of resolution triggers outlined in the SRM, we also study the potential benefits of market and balance sheet dependent triggers. While our findings suggest some weak evidence of a capacity to differentiate between failed and surviving banks, the results are indicative...

http://hdl.handle.net/10197/6486

Marked Mark

Long-Run international diversification (2015)

Conlon, Thomas; Cotter, John; Gençay, Ramazan

Long-Run international diversification (2015)

Conlon, Thomas; Cotter, John; Gençay, Ramazan

Abstract:

Prevailing wisdom in finance suggests long-run investors have a competitive advantage, since they can ride out short-run fluctuations and mispricing, and pursue illiquid investments. This paper investigates if this advantage holds in a portfolio context, examining benefits of international diversification across short- and longrun horizons. Employing a multi-horizon non-parametric filter, increased long-run correlations between international equity markets are detailed, even for synchronized markets. A model replicating the temporal aggregation properties of intermarket correlation is developed, indicating that short-run correlations are downward biased by frictions. Finally, the impact on portfolio allocation is investigated, demonstrating decreased risk reduction benefits in the long-run.
Science Foundation Ireland
Irish Canadian University Foundation
Natural Sciences and Engineering Research Council of Canada
Social Sciences and Humanities Research Council of Canada

http://hdl.handle.net/10197/6485

Marked Mark

Multiscaled cross-correlation dynamics in financial time series (2009)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Multiscaled cross-correlation dynamics in financial time series (2009)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Abstract:

The cross-correlation matrix between equities comprises multiple interactions between traders with varying strategies and time horizons. In this paper, we use the Maximum Overlap Discrete Wavelet Transform (MODWT) to calculate correlation matrices over different time scales and then explore the eigenvalue spectrum over sliding time windows. The dynamics of the eigenvalue spectrum at different scales provides insight into the interactions between the numerous constituents involved. A study of the eigenvalue spectrum in its entirety provides further insight. On partitioning the eigenvalue time series, we show that negative index returns, (drawdowns), are associated with periods where the largest eigenvalue is greatest, while positive index returns, (drawups), are associated with periods where the largest eigenvalue is smallest. Furthermore, through the study of the small eigenvalues of the correlation matrix, we show that information about the correlation dynamics is visible at both ...

http://doras.dcu.ie/14915/

Marked Mark

Random matrix theory and fund of funds portfolio optimisation (2007)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Random matrix theory and fund of funds portfolio optimisation (2007)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Abstract:

The proprietary nature of Hedge Fund investing means that it is common practise for managers to release minimal information about their returns. The construction of a Fund of Hedge Funds portfolio requires a correlation matrix which often has to be estimated using a relatively small sample of monthly returns data which induces noise. In this paper random matrix theory (RMT) is applied to a cross-correlation matrix C, constructed using hedge fund returns data. The analysis reveals a number of eigenvalues that deviate from the spectrum suggested by RMT. The components of the deviating eigenvectors are found to correspond to distinct groups of strategies that are applied by hedge fund managers. The Inverse Participation ratio is used to quantify the number of components that participate in each eigenvector. Finally, the correlation matrix is cleaned by separating the noisy part from the non-noisy part of C. This technique is found to greatly reduce the difference between the pre...

http://doras.dcu.ie/14833/

Marked Mark

Seizure characterisation using frequency-dependent multivariate dynamics (2009)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Seizure characterisation using frequency-dependent multivariate dynamics (2009)

Conlon, Thomas; Ruskin, Heather J.; Crane, Martin

Abstract:

The characterisation of epileptic seizures assists in the design of targeted pharmaceutical seizure prevention techniques and pre-surgical evaluations. In this paper, we expand on recent use of multivariate techniques to study the crosscorrelation dynamics between electroencephalographic (EEG) channels. The Maximum Overlap Discrete Wavelet Transform (MODWT) is applied in order to separate the EEG channels into their underlying frequencies. The dynamics of the cross-correlation matrix between channels, at each frequency, are then analysed in terms of the eigenspectrum. By examination of the eigenspectrum, we show that it is possible to identify frequency dependent changes in the correlation structure between channels which may be indicative of seizure activity. The technique is applied to EEG epileptiform data and the results indicate that the correlation dynamics vary over time and frequency, with larger correlations between channels at high frequencies. Additionally, a redistributi...

http://doras.dcu.ie/14854/

Marked Mark

The Intervaling Effect on Higher-Order Co-Moments (2016)

Conlon, Thomas; Cotter, John; Jin, Chenglu

The Intervaling Effect on Higher-Order Co-Moments (2016)

Conlon, Thomas; Cotter, John; Jin, Chenglu

Abstract:

This paper investigates the sensitivity of higher-order co-moments for different return measurement intervals. The levels of systematic skewness and kurtosis are found to be significantly influenced by the length of return interval. An asset preferred because of its positive co-skewness and low co-kurtosis when measured in one particular interval may have negative co-skewness or high co-kurtosis for another interval. We find the intervaling effect varies according to the level of price adjustment delay as proxied by market capitalization and illiquidity. Findings persist for intervals of up to twelve months, and are consistent during both volatile and stable periods.
Science Foundation Ireland
Chinese Scholarship Council

http://hdl.handle.net/10197/7468

Marked Mark

Wavelet multiscale analysis for hedge funds: scaling and strategies (2008)

Conlon, Thomas; Crane, Martin; Ruskin, Heather J.

Wavelet multiscale analysis for hedge funds: scaling and strategies (2008)

Conlon, Thomas; Crane, Martin; Ruskin, Heather J.

Abstract:

The wide acceptance of Hedge Funds by Institutional Investors and Pension Funds has led to an explosive growth in assets under management. These investors are drawn to Hedge Funds due to the seemingly low correlation with traditional investments and the attractive returns. The correlations and market risk (the Beta in the Capital Asset Pricing Model) of Hedge Funds are generally calculated using monthly returns data, which may produce misleading results as Hedge Funds often hold illiquid exchange-traded securities or difficult to price over-the- counter securities. In this paper, the Maximum Overlap Discrete Wavelet Transform (MODWT) is applied to measure the scaling properties of Hedge Fund correlation and market risk with respect to the S&P 500. It is found that the level of correlation and market risk varies greatly according to the strategy studied and the time scale examined. Finally, the effects of scaling properties on the risk profile of a portfolio made up of Hedge Fund...

http://doras.dcu.ie/14961/