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Jump Processes in Exchange Rates Modeling

Bunčák, Tomáš - Volkswirtschaftliche Fakultät, … - 2013

This text presents a study of various models based on jump processes in the context of foreign exchange (FX) rates modeling. Quality of FX rate log-returns fit is assessed for models such as Merton and Kou jump-diffusions, normal inverse Gaussian, variance gamma, and Meixner. The study is...

Persistent link: https://www.econbiz.de/10011258961

Banks exposure to market risks

Galy, Michel - Volkswirtschaftliche Fakultät, … - 1989

Maturity transformation coupled with open foreign exchange positions expose financial intermediaries to unexpected changes in interest and exchange rates. This paper proposes to measure the degree of banks exposure to market risks by taking the variance of the total differential of the bank...

Persistent link: https://www.econbiz.de/10011183544

Exchange rates and commodity prices: measuring causality at multiple horizons

Zhang, Hui Jun; Dufour, Jean-Marie; Galbraith, John - Centre Interuniversitaire de Recherche en Analyse des … - 2013

Understanding and measuring the relative roles of different causal channels between commodity prices and exchange rates has important implications in financial decision making, especially for market participants with short horizons. From a macroeconomic perspective, this can also be useful for...

Persistent link: https://www.econbiz.de/10011183664

Econometric Analysis of Present Value Models When the Discount Factor Is near One

West, Kenneth D. - National Bureau of Economic Research (NBER) - 2012

This paper develops asymptotic econometric theory to help understand data generated by a present value model with a … discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that … theory is quantitatively congruent with modest departures from random walk behavior with imprecise estimation of a well …

Persistent link: https://www.econbiz.de/10010785624

The carry trade and fundamentals: Nothing to fear but FEER itself

Jordà, Òscar; Taylor, Alan M. - In: Journal of International Economics 88 (2012) 1, pp. 74-90

Risky arbitraging based on interest rate differentials between two countries is typically referred to as a carry trade. Up until the recent global financial crisis, these trades generated years of persistent positive returns, which were hard to reconcile with standard pricing kernels. In 2008...

Persistent link: https://www.econbiz.de/10011056353

Predicting Exchange Rates Out of Sample: Can Economic Fundamentals Beat the Random Walk?

Li, Jiahan; Tsiakas, Ilias; Wang, Wei - Rimini Centre for Economic Analysis (RCEA) - 2014

This paper shows that economic fundamentals can generate reliable out-of-sample forecasts for exchange rates when prediction is based on a "kitchen-sink" regression that incorporates multiple predictors. The key to establishing predictability is estimating the kitchen-sink regression with the...

Persistent link: https://www.econbiz.de/10010748422

Foreign Exchange Risk and the Predictability of Carry Trade Returns

Cenedese, Gino; Sarno, Lucio; Tsiakas, Ilias - Rimini Centre for Economic Analysis (RCEA) - 2014

This paper provides an empirical investigation of the time-series predictive ability of foreign exchange risk measures on the return to the carry trade, a popular investment strategy that borrows in low-interest currencies and lends in high-interest currencies. Using quantile regressions, we nd...

Persistent link: https://www.econbiz.de/10010748424

Possibilities to Study the Market Trend Fluctuations by Means of Indicators for Technical Analysis

Marinov, Marin - In: Economic Thought journal (2010) 3, pp. 68-85

The oscillators (indicators), capturing the price changes of shares, currencies, indexes and other investment instruments in the short run are emphasized. The main aim is to reveal the capability of the indicators as an adequate instrument to forecast the changes in the market trend of...

Persistent link: https://www.econbiz.de/10008503600

The Carry Trade and Fundamentals: Nothing to Fear But FEER Itself

Jordà, Òscar; Taylor, Alan M. - C.E.P.R. Discussion Papers - 2009

The carry trade is the investment strategy of going long in high-yield target currencies and short in low-yield funding currencies. Recently, this naive trade has seen very high returns for long periods, followed by large crash losses after large depreciations of the target currencies. Based on...

Persistent link: https://www.econbiz.de/10008491718

Econometric analysis of present value models when the discount factor is near one

West, Kenneth D. - In: Journal of Econometrics 171 (2012) 1, pp. 86-97

This paper develops asymptotic econometric theory to help understand data generated by a present value model with a … discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that … theory is quantitatively congruent with the modest departures from random walk behavior that are typically found and with …

Persistent link: https://www.econbiz.de/10010594955