Financial markets are one of the most fundamental markets in any country. In the financial markets, the securities market and the foreign exchange market are sensitive sectors. These two markets are affected by fluctuations and economic cycles so reflect economic changes rapidly. Changes in the returns of one market due to arbitrage conditions during time lead to changes in the returns of other...

In this review article, we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions of research, some focusing on more elaborate mathematical models that are capable of rationalizing the empirical facts, others taking a completely different ...

In advice given to emerging market economies (EMEs), it is often emphasised that having developed financial markets would both enable them to manage capital flows more efficiently, thereby reducing the need to intervene in the foreign exchange markets, and allow for more effective monetary policy. But despite their evident benefits, it is also the case that developed financial markets can compl...

We develop a theory of financial innovation in which both market structure and the payoffs claims being traded are determined endogenously. Intermediaries use cash flows an underlying asset to design securities for investors. Demand arises as investors choose markets then trade using strategies represented by quantity-price schedules. show that intermediaries create increasingly riskier asset-b...