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Currency Market (currency + market)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	81%

Selected Abstracts

Cointegration, Efficiency and Forecasting in the Currency Market

JOURNAL OF BUSINESS FINANCE & ACCOUNTING, Issue 1-2 2001
Wilson H. S. Tong
Existing literature on using the cointegration approach to examine the efficiency of the foreign exchange market gives mixed results. Arguments typically focus on econometric testing techniques, with fractional cointegration being the most current one. This paper tries to look at the issue from an economic perspective. It shows that the cointegrating relationship, whether cointegrated or fractionally cointegrated, is found mainly among the currencies of the European Monetary System which are set to fluctuate within a given range. Hence, there is no inconsistency with the notion of market efficiency. Yet, exploiting such a cointegrating relationship is helpful in currency forecasting. There is some evidence that restricting the forecasting model to consist of only cointegrated currencies improves forecasting efficiency. [source]

Does Asia Need a Common Currency Market?

PACIFIC ECONOMIC REVIEW, Issue 1 2002
Robert Mundell
First page of article [source]

Hedging under Transaction Costs in Currency Markets: a Discrete-Time Model

MATHEMATICAL FINANCE, Issue 1 2002
FREDDY DELBAEN
We consider a discrete-time model of a currency market with transaction costs and give a description of initial endowments that allow the investor to hedge a contingent claim in various currencies by a self-financing portfolio. [source]

Old Habits Are Hard to Change: A Case Study of Israeli Real Estate Contracts

LAW & SOCIETY REVIEW, Issue 2 2010
Doron Teichman
This article presents a case study on the persistent dollarization norm in the Israeli real estate market. For many years Israeli real estate contracts have been denominated in American dollars. This contracting norm has remained surprisingly stable despite tremendous changes in the structure of the Israeli foreign currency market that severed the connection between the dollar and local inflation and added significant risks to exchange rates. Using an array of theoretical tools, I explain this puzzling phenomenon and demonstrate the centrality of social norms to the design of high-stakes contracts. Finally, I explore the interaction between social norms and the law and highlight the potential obstacles to regulating contracting norms. [source]

Entry of foreign banks in Shanghai: implications for business strategies in an increasingly competitive market

MANAGERIAL AND DECISION ECONOMICS, Issue 6 2005
M.K. Leung
This paper uses a simple mean-variance choice model as the basis of a duration analysis of the factors determining the decision of a foreign bank to establish a branch in Shanghai, the fast developing financial centre in China. Bank attributes, namely region of origin, parent bank size, the number of international branches and their branch network in China, have a significant impact on the time to entry. A country's share of total foreign direct investment in Shanghai also significantly affects the entry decision. The attributes facilitating entry also provide the foreign bank with a competitive advantage in its foreign currency transactions in Shanghai. However, with the ensuing market liberalisations after China's WTO accession, the entrants' competitiveness may not be sustained in the local currency market, especially following the proactive business strategies of Chinese banks and the protectionist measures of the government. It is expected that only a small number of the entrants will be able to emerge as big market players in the growing domestic currency market in Shanghai. Copyright © 2005 John Wiley & Sons, Ltd. [source]

Hedging under Transaction Costs in Currency Markets: a Discrete-Time Model

The quality of volatility traded on the over-the-counter currency market: A multiple horizons study

THE JOURNAL OF FUTURES MARKETS, Issue 3 2003
Vicentiu Covrig
Previous studies of the quality of market-forecasted volatility have used the volatility that is implied by exchange-traded option prices. The use of implied volatility in estimating the market view of future volatility has suffered from variable measurement errors, such as the non-synchronization of option and underlying asset prices, the expiration-day effect, and the volatility smile effect. This study circumvents these problems by using the quoted implied volatility from the over-the-counter (OTC) currency option market, in which traders quote prices in terms of volatility. Furthermore, the OTC currency options have daily quotes for standard maturities, which allows the study to look at the market's ability to forecast future volatility for different horizons. The study finds that quoted implied volatility subsumes the information content of historically based forecasts at shorter horizons, and the former is as good as the latter at longer horizons. These results are consistent with the argument that measurement errors have a substantial effect on the implied volatility estimator and the quality of the inferences that are based on it. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:261,285, 2003 [source]

Information and volatility links in the foreign exchange market

ACCOUNTING & FINANCE, Issue 2 2009
Sirimon Treepongkaruna
G12; G14 Abstract We apply the trading model of Fleming et al (1998). to a number of currency markets. The model posits that two markets can have common volatility structures as a result of receiving common information and from cross-hedging activity where a position in one currency is used to hedge risk in a position taken in another. Our results imply that the model is effective in identifying common information flows and volatility spillovers in the currency markets and that some of these effects are lost when simply examining raw correlations. A series of specification tests of the 21 bivariate systems that are examined provides support for the trading model in the foreign exchange context. [source]

Exchange Rate Volatility and Democratization in Emerging Market Countries

INTERNATIONAL STUDIES QUARTERLY, Issue 2 2003
Jude C. Hays
We examine some of the consequences of financial globalization for democratization in emerging market economies by focusing on the currency markets of four Asian countries at different stages of democratic development. Using political data of various kinds,including a new events data series,and the Markov regime switching model from empirical macroeconomics, we show that in young and incipient democracies politics continuously causes changes in the probability of experiencing two different currency market equilibria: a high volatility "contagion" regime and a low volatility "fundamentals" regime. The kind of political events that affect currency market equilibration varies cross-nationally depending on the degree to which the polity of a country is democratic and its policymaking transparent. The results help us better gauge how and the extent to which democratization is compatible with financial globalization. [source]

Spot-futures spread, time-varying correlation, and hedging with currency futures

THE JOURNAL OF FUTURES MARKETS, Issue 10 2006
Donald Lien
This article investigates the effects of the spot-futures spread on the return and risk structure in currency markets. With the use of a bivariate dynamic conditional correlation GARCH framework, evidence is found of asymmetric effects of positive and negative spreads on the return and the risk structure of spot and futures markets. The implications of the asymmetric effects on futures hedging are examined, and the performance of hedging strategies generated from a model incorporating asymmetric effects is compared with several alternative models. The in-sample comparison results indicate that the asymmetric effect model provides the best hedging strategy for all currency markets examined, except for the Canadian dollar. Out-of-sample comparisons suggest that the asymmetric effect model provides the best strategy for the Australian dollar, the British pound, the deutsche mark, and the Swiss franc markets, and the symmetric effect model provides a better strategy than the asymmetric effect model in the Canadian dollar and the Japanese yen. The worst performance is given by the naïve hedging strategy for both in-sample and out-of-sample comparisons in all currency markets examined. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1019,1038, 2006 [source]

A Perspective on Modelling the Australian Real Trade Weighted Index since the Float

AUSTRALIAN ECONOMIC PAPERS, Issue 1 2003
Shakila Aruman
Since the deregulation of the Australian dollar market in December 1983, considerable effort has been devoted by the central bank to understanding movements in the value of the currency. As the Reserve Bank of Australia (RBA) has a pivotal role to play in currency markets, attention has been focussed on the modelling techniques used by the Bank's researchers in this process. This paper examines the ancestral development of the current model of the Australian Trade Weighted Index (rtwi) used at the RBA, as specified in Beechey et al. (2000). Estimates and forecasting evaluations of the various models imply that only the relationships between the rtwi, the terms of trade and interest differentials hold consistently, providing the empirical foundation for the current RBA model. [source]