samchain/econo-pairs-v1 huggingface dataset:
That is what we appear, increasingly, to find in financial market prices in practice, whether in volatility and correlation or in fat tails and persistence. This change in price dynamics will in turn influence market-making behaviour. Consider the problem facing an HFT market-maker. They face inventory risk from market fluctuations and information risk from adverse selection. Pricing these risks means forming a guess about the future path of prices. The greater the potential range of future prices, the larger the insurance premium they will demand. The future price range (maximum – minimum) for a price series at some future date T, R(T), can be written generically as: 20 (1) where κ is a constant and σT is the standard deviation of the process up to time T. H is our old friend the Hurst coefficient, dredged up from the Nile; it can be thought to summarise the degree of fat-tailedness and persistence in prices. When the holding period is short (say T=1), as with HFT, the future price range is the volatility of the series magnified by the Hurst coefficient. In other words, the fatter and more persistent the tails (H), the greater the market risk and the wider the bid-ask spread of the HFT. This has implications for the dynamics of bid-ask spreads, and hence liquidity, among HFT firms. During a market crash, the volatility of prices (σ) is likely to spike. From equation (1), fractality heightens the risk-sensitivity of HFT bid-ask spreads to such a volatility event.

Both private consumption and investment provided an important stimulus to the growth rate in the first quarter of this year. More up-to-date indicators point towards continued expansion in the second quarter, albeit at a possibly more moderate pace than in the first quarter. The outlook on consumption is supported by higher real earnings growth and declining unemployment, and is reflected in consumer confidence. The evidence for the corporate sector is perhaps more mixed. As compared to the first quarter of 1998, industrial production figures show a somewhat slower rate of increase in the period from April to May, but capacity utilisation has continued to increase and this, combined with low interest rates, should underpin investment. European Commission survey data, such as confidence indicators and the assessment of order books, bear witness to relatively high levels, both with respect to their longterm averages and recent peaks. This can also be taken as a favourable indicator for continued growth in the short term, although some indicators have not improved further since the spring. Unemployment has also been declining, but at a modest pace, and from a high level. In discussing the cyclical uncertainties, one should not forget that work on badly needed structural reforms has not so far made much progress. Considering recent price developments, HICP inflation for the euro area as a whole remained stable at 1.4% between May and July. Both domestic and external factors still appear to be favourable, suggesting that euro area inflation may be expected to remain subdued in the future.
Mervyn King: Monetary policy developments Speech by Mr Mervyn King, Governor of the Bank of England, at the CBI Northern Ireland Mid-Winter Dinner, Belfast, 22 January 2013. *  *  *  I am delighted to be in Belfast to deliver my final regional speech as Governor. After the Bank obtained independence in 1997, we decided to establish a physical presence in Northern Ireland for the first time. And I was able to announce the opening of the Agency when I visited Belfast in May 1999. Since then the links between the business community and the Agency have gone from strength to strength. None of this would have been possible without the commitment of a remarkable group of Bank of England Agents: first, Nigel Falls, then Phil Eckersley and now Frances Hill, all supported by Gillian Anderson, today the Deputy Agent. During that same visit, I met with a group of politicians from right across the political spectrum. They were surprisingly eager to talk with, not at, each other – because they wanted to exchange views about the economic future of Northern Ireland, and to get away, at least for a while, from the divisive nature of daily politics. You would have been hard put to identify the affiliation of those politicians from their views on how to promote economic prosperity in Northern Ireland. And this is the key to the future.

Several broad economic forces substantially complicate an already difficult set of political challenges: the long-term increase in income inequality, the slow pace of growth in real wages for the middle quintiles of the population, the increase in the volatility of income that is a reflection of the greater flexibility of the U.S. economy, and the greater exposure of households to the risk in financing retirement and the burden of paying for health care. More generally, the global financial system and the monetary arrangements that underpin it are in the process of a delicate and consequential transition as the major emerging market economies particularly in Asia - move toward more mature monetary policy frameworks, more flexible exchange rate regimes and more open capital markets. This transition will require careful management, and the economic dimensions of getting it right would be complicated even without the political pressures those governments face. One final note on the financial system. The global financial system is in the process of very dramatic change. The changes of even just the last five years are extraordinary, in terms of the size, and strength, and scope of the major global firms, the role of private leveraged funds, the extent of risk transfer and the increase in the size of the derivatives market, the change in the structure of the credit market, the increase in and changes in the pattern of cross border financial flows.
These efforts of the central banks and of the governments are aiming at permitting the banks to live up to their role in the economy by resuming lending to economic agents. Reasons for a medium-term economic recovery 2009 will be a very difficult year. I have already said this on various occasions. I see however at least four reasons why we can be confident that the world economy and the industrialised nations will recover: •  The vigorous reactions of central banks and governments to the extraordinary situation – not only in Europe, but worldwide – will progressively produce their effects. They may not yet have been sufficiently taken into account in the expectations of private sector participants. •  The growth potential of the emerging market economies, for example, in Asia, is considerable. Their current deceleration of growth is temporary. Many of these countries have an enormous potential to develop domestic demand. •  Technological progress is very rapid and will continue and even accelerate. It is a major source of future long term growth. •  Prices for oil and other commodities have fallen sharply since mid-2008. Their rise was an important factor in the current economic weakness. Their present low levels will be an expansionary contribution to the global economy  For these reasons it seems to be a reasonable working hypothesis that after an exceptionally difficult 2009 we will see an economic recovery in 2010.

BIS Review 16/2009  1  A glance at the inflation rates in the euro’s first decade makes this clear: the average annual inflation rate in the euro area in the ten years since the introduction of the currency was 2.2%. By comparison, the average annual rate of inflation in Germany in the 1990s, before the euro was introduced, was also 2.2%. In the 1980s, the rate was 2.9%, in the 1970s 4.9%. In other words, in terms of stability, the euro does not need to shy away from any comparison with the Deutsche Mark and other legacy currencies. At 2.2% per year since 1999 average inflation was somewhat above the level that the ECB’s Governing Council has defined as price stability: an inflation rate of below, but close to, 2% in the euro area, over the medium term. Nevertheless, the result remains good, for the first ten years were anything but calm. In particular, we had an oil price shock, which was certainly comparable with that of the 1970s. Between early 2002 and mid-2008, crude oil prices in dollar terms rose by nearly 600%. In the case of food prices as well, we faced price pressures: at the beginning of the decade, and in particular in 2007 and 2008 by the global rise in food prices. Despite these shocks and short-lived erratic price movements, inflation rates remained generally low. Above all, inflation expectations were and are firmly anchored at a level in line with our definition of price stability.
This led to the displacement of more than 25,000 people, loss of lives and significant economic damage. Last year, 53 weather disasters across the world racked up more than USD1 billion in economic losses 1. In fact, it is estimated that altogether, economic losses from natural disasters were more than a quarter of a trillion US dollars in 2020 2. These events are prompting a renewed determination around the world to achieve a new balance of economic, social and environmental progress. Indeed, the pandemic presents a once-in-ageneration opportunity to place sustainable development firmly at the core of recovery plans. To date, Governments of more than 120 countries have committed to “Net Zero” by mid-century or earlier. Among the countries are some of Malaysia’s major trading partners such as the EU, South Korea, Japan and China. Similarly, more and more companies are also adopting net zero targets. It is noteworthy that in 2020 – during the pandemic - such commitments by regions increased by ninefold, and threefold by corporates. This is significant. A fast growing number of countries have also introduced climate change legislation and carbon management programs. Global climate change laws are reported to have increased twenty-fold since 1997 across 164 countries, up from 99 countries just 6 years ago 3. Climate-related laws and frameworks are also being strengthened in many countries, in ways that could significantly alter the course of economic development going forward.

But the intention – the international commitment to macro-economic stability – is clear. Acceptance of the aim of macro-economic stability served to bring into sharper focus the structural, supply side, of the economy – that is the whole raft of influences that can affect the underlying growth rate of capacity and thus the growth rate of aggregate demand that can be sustained. And here, too, there has been a strengthening international presumption in favour of open markets and free competition – both domestically and internationally – with a continuing strong presumption against predatory trade or exchange rate manipulation. The justification is that undistorted competition contributes to potential global economic growth through increased efficiency and the more effective allocation of productive resources. Faster growth in turn provides a more favourable context for addressing social concerns, including the issue of poverty. The international presumption in favour of free markets in itself is somewhat remarkable, given that, at the micro-economic level, increased competition invariably constitutes a threat to established producers – and their employees – who might well be tempted to urge protection in one form or another on their national governments. Consumers, who benefit from such competition, tend to be less vocal or well organised. The threat of protectionism is never, therefore, far away. But in fact the presumption in favour of competition has proved encouragingly robust. And that is not just in relation to international trade.
The ECB’s Governing Council does not consider that appropriate. The governments themselves have several means to leverage the EFSF. Yet again the banks are deeply in crisis and clearly need to be recapitalised. Can the euro area afford another banking crisis? We have to deal with the sovereign risk tensions and we have to deal with the banking tensions. It is crucial that the banks put their balance sheets in order as quickly as possible. They need to build up a stronger equity position by retaining profits and being less generous with bonus payments. In so far as is possible, they must recapitalise in the market. If a financial institution has no access to the capital markets, the Government must stand ready to recapitalise solvent banks. In addition, where it would be necessary, the Heads of Government have decided that the EFSF can be mobilised to recapitalise banks. How can it be prevented in future that taxpayers have to continuously save the banks? The global financial system must be much more resilient. That is the reason why we have to apply rigorously and fully the new Basel III rules, to be sure that systemically important financial institutions do not put the sector in danger. In this regard we have to be inflexible and oppose any pressure group. Under your leadership, the ECB has risen to become Europe’s secret government. Is it not deeply undemocratic when representatives of an unelected institution like the ECB can dictate austerity plans to an elected government like Italy’s?

And we are totally devoted to our primary Treaty mandate of price stability. We have delivered price stability over 13 years with an annual inflation rate of 2.0% for the euro area as a whole and 1.55% for Germany. This is better than any time over the previous 50 years. For the last four years we have been experiencing the worst global crisis since World War II, and not surprisingly it is hampering our monetary policy transmission. That is why we have had to take some non-standard measures but with caution and prudence. With our decisions since the outbreak of the crisis, we have reacted appropriately to the market failures in the financial markets. We have lived up to our responsibilities. The two German members of the ECB’s Governing Council, Axel Weber and Jürgen Stark, both resigned because they could no longer support the buying up of government bonds. Jürgen is a very good European and a very close friend. Over the last 18 years he has been closely involved in the European construction and European unity. He has been an outstanding ECB Chief Economist. He is one of the greatest champions of the European Union that I know. When, after serving the euro for many years, such a person, who has been totally loyal to the institution, announces his resignation for personal reasons, one has to fully respect his decision. According to opinion polls, a majority of Germans now want the Deutsche Mark back.
This infrastructure is often housed with the supplier of the payment service or with some other intermediary. After these checks, the actual payment is implemented, that is, the money is moved from the payer to the recipient. This is called clearing and settlement and it requires a further infrastructure. The systems that manage the entire process are characterised by both network effects and economies of scale. Both aspects mean that the payment infrastructure must of necessity be very concentrated and standardised. Although this is necessary, it entails a number of other problems. One such problem is greater vulnerability in society as a result of what is usually called the “single point of failure”. If the infrastructure is affected by serious shocks, there are no alternatives available, especially if cash has been phased out. Let us assume that the card system stops functioning for some reason, at the  5 [6]  same time as cash payments are no longer possible in practice. This situation would cause serious disruptions to society. A further aspect to take into account is that when the infrastructure is concentrated to the hands of a few, it is easy that problems arise with regard to lack of competition and entry barriers for new agents. Ultimately, this can in turn entail efficiency losses for society as a whole and low incentives for innovation. A potential e-krona could alleviate both of these problems. An e-krona could be based on a separate infrastructure that could be used if the alternative systems fail.

•  Such risks include defaults and insolvencies of trading partners, regulatory changes, expropriation, labour unrest, and acts of terrorism. •  As the largest centre for structured trade credit and political risk insurance in Asia, Singapore can provide Chinese banks and corporates comprehensive and tailored risk management solutions. Infrastructure financing China is playing an increasingly important role in helping regional economies with infrastructure development through its “One Belt One Road” initiative. Chinese corporates and financial institutions can tap into Singapore’s well-developed infrastructure financing ecosystem in the following ways. •  Leverage on the strong network of multilateral agencies, banks and institutional investors to access regional infrastructure deals. •  Deepen their expertise in project structuring, risk allocation, and loan documentation. •  Gain access to the network of local project sponsors who are traditionally more accustomed to dealing with local and global banks. 4  BIS central bankers’ speeches  Asset management China is one of the key markets for Singapore-based fund managers, both as an investment destination as well as a source of capital. •  There is strong interest from financial institutions here to tap Singapore’s RQFII quota and offer investments with China exposures. •  Last week, Blackrock secured RMB 20 billion of approved RQFII quota in Singapore, which is the second largest quota granted to-date. At the same time, the Singapore market offers globally diversified investment portfolios for Chinese pension funds, insurance companies, and individuals.
If we hold the bond until it has matured, we know exactly how many Swedish kronor the Riksbank will receive in interest on it. And we also know how much it cost to buy. But we don’t know what the funding cost for the bonds will be. Because the cost depends on how the repo rate develops up until the bond matures. This maturity transformation is actually quite similar to operations pursued by commercial banks to make a profit, i.e. holding long-term assets funded by short-term borrowing. And even if such operations are associated with an interest-rate risk which makes for an uncertain return, one can normally count on making a profit more often than making a loss. This is because short-term rates (such as the repo rate that has a one-week maturity) are usually on average slightly lower than long-term rates (e.g. the rate for five-year government bonds). In economics jargon, this is referred to as term premiums on the financial markets normally being positive. In practice, however, it is very difficult to determine how large these term premiums are at any one particular time. The premiums cannot be directly observed on the financial markets but must either be estimated based on a forecast for future shortterm rates or estimated using statistical methods based on historical connections between interest rates at various maturities and different asset-types. 7 The ECB’s (2012) interpretation of this is that central banks should avoid prolonged periods with negative  equity.

The bonds have so far increased in value but there is every indication that they will lead to a loss in the future, and hence contribute to a period of lower or zero dividends to the government. 2 Today, I would like to outline how the bond purchases have created these interest-rate risks and how future interest-rate developments will affect the Riksbank’s profits and dividends.   Thanks to Carl-Johan Belfrage, who has helped me write the text, and to Jan Alsterlind, Heidi Elmér, Henrik Erikson, Rickard Eriksson, Ola Melander, Marianne Sterner, Ulf Söderström and Anders Vredin, who have contributed valuable comments and observations. 1 See af Jochnick (2015). 2 Another change is that the Riksbank has built up a larger foreign exchange reserve. This larger reserve does not, however, involve any actual increase in the currency or interest-rate risks as it is funded by foreign exchange loans with approximately the same maturities as the new assets. But the larger foreign exchange reserve will still lead to the Riksbank’s reported profit being more sensitive to interest rates. This is because the Riksbank’s assets but not its liabilities are reported at market value. The lower interest rates have therefore improved the Riksbank’s reported profit via value increases in the foreign exchange reserve, but will contribute to lower reported profit a few years ahead. 1 [12]  Chart 1.
However, while regulatory capital is important and may represent an overall constraint, research and discussions with banks actually suggest that, when determining the price of a loan, banks consider all of the economic risks associated with a particular borrower. It seems that factors such as “economic capital” and the level of competition are much more influential in individual loan pricing than regulatory capital. That finding should be no surprise to any banker or supervisor – banks that are managing their risks appropriately are already considering the risks that they face when they lend to higher-risk borrowers, and thus lower credit quality is already priced into a loan, even under the existing less risk-sensitive capital rules today. Furthermore, there are additional elements in Basel II that can contribute to alleviating concerns about the impact on capital flows to emerging markets. Let me mention the reduction in capital charges for retail lending, residential mortgages, small and medium enterprises (exposures below € 1 million) and well-provisioned past-due loans. Also, the recognition of credit risk mitigants, such as collateral and guarantees, is significantly better in the new framework of Basel II. If we take a medium or longer-term perspective, the different channels that I mentioned before will ensure better access to financial flows for the same risk.

But if it regains its reform momentum and begins to address its infrastructure deficit, growth should pick up to levels closer to those seen in the last decade. 15. In the ASEAN–4 economies of Indonesia, Malaysia, Thailand and the Philippines, domestic demand has displayed surprising resilience. This has held up economic growth, despite prolonged weakness in external demand and continuous terms-of-trade shocks. 16. But Emerging Asia is also not without its risks. While the advanced economies are deleveraging, Emerging Asia is re-leveraging. Credit growth has been climbing steadily, from an average 8% in 2009 to 15% in 2011, before easing to 12% in last year. The private  2  BIS central bankers’ speeches  credit-to-GDP ratio for the region, at 120%, is higher than during the Asian financial crisis. There is good reason for policymakers to be on their guard. Macro policies: the unfinished agenda 17. So, where is the global economy on its post-crisis journey? While economic prospects for 2013 look slightly brighter and tail risks have diminished, the global economy and financial markets remain fragile and vulnerable to shocks. 18. But this halfway point provides us, perhaps for the first time since the crisis, the opportunity to look ahead and pose the question of what is required to ensure a smooth return to normalcy. •  The advanced economies need to achieve fiscal consolidation alongside economic growth and chart an effective exit strategy from unconventional monetary policies.