We study the implications of deviations from covered interest rate parity for international capital flows using novel data covering euro-area derivatives and securities holdings. Consistent with a dynamic model of currency risk hedging, we document that investors' holdings of USD bonds decrease...

This paper examines the transition from LIBOR to SOFR in the US and maps out the consequences for European corporate treasurers by showing how the application of SOFR in cash products and derivatives differs from LIBOR. As interest rate and cross-currency swaps transition to compounded SOFR,...

This paper analyzes the dynamics of Canadian dollar-denominated (CAD) interest rate swap yields. It applies autoregressive distributive lag (ARDL) models, using monthly time series data, to estimate the effects of the current short-term interest rate and other relevant macro-financial variables...

Following the introduction of EUR/USD futures and USD/JPY futures on 31 October 2022, Thailand Futures Exchange first entered the top 11 list of derivatives exchanges based on foreign exchange derivative volumes in 2022. This paper investigates the dynamics of foreign exchange futures trading...

This paper presents an empirical analysis of the effectiveness of foreign exchange (FX) intervention in Peru, with emphasis on the intervention carried out through derivative instruments. I use two different but related approaches to estimate the impact of these kind of interventions between...

This paper investigates how the introduction of foreign exchange futures has an impact on spot volatility and considers the contemporaneous and dynamic relationship between spot volatility and foreign exchange futures trading activity, including trading volume and open interest in the Thailand...

This paper models the dynamics of Chinese yuan (CNY)-denominated long-term interest rate swap yields. The financial sector plays a vital role in the Chinese economy, which has grown rapidly in the past several decades. Going forward, interest rate swaps are likely to have an important role in...

We describe a simple framework for the currency hedging of global investment portfolios from the perspective of an investor seeking to maximise a classical Markowitz utility function. Practical application of this framework caters to investors without access to currency derivative instruments....

The US dollar has been the world's dominant reserve currency for decades, but its future is uncertain amid concerns about inflation, economic instability, and geopolitical tensions. One proposed solution to these challenges is to return to a gold-backed currency, which would provide a stable...

It is well known that the no-arbitrage condition in forward markets is obtained as a feature of the equilibrium if the model allows for strategic behavior on the part of the buyers. We experimentally test for the no-arbitrage condition in a forward market by allowing for active buyers. We test...

This research explores upside and downside jumps in the dynamic processes of three rates: domestic interest rates, foreign interest rates, and exchange rates. To fill the gap between the asymmetric jump in the currency market and the current models, a correlated asymmetric jump model is proposed...

In everyday life, people in general often carry out transactions either directly or indirectly. The following will be studied in this paper regarding derivative transactions and foreign currency, this is due to the lack of knowledge of the Indonesian people about the derivative transactions...

This study aims to determine whether the use of derivatives in non-financial companies in Indonesia as a hedging instrument affects firms' exchange rate risk exposure. The study's sample is 164 non-financial companies listed on the Indonesia Stock Exchange in 2019. We used the multiple...

Using confidential daily foreign exchange interventions (FXI) data, we analyse the FXI episode of the Bank of Israel (BOI) from 2013 to 2019. We find that a purchase of US dollar (USD) 1 billion is on average associated with a depreciation of the Israeli new shekel (ILS) by 0.82%-0.83%, which is...

Many empirical studies show that forward rate under or over predict the future spot rate. These studies theorize that the possible explanation can be existence of risk premium in the foreign exchange market. This paper carries out an empirical investigation to determine the presence of risk...

We undertake the first comprehensive investigation into the use of currency forwards at international equity mutual funds. Using a unique hand-collected dataset spanning 15-years and over 1,200 US mutual funds, we identify three distinct approaches to using currency forwards that span liquidity,...

This paper presents the first comprehensive examination of liquidity in the global foreign exchange (FX) swap market. Our analysis employs effective measures that assess both the tightness and depth of the global market. We identify three main findings: First, FX swap liquidity is fragmented...

Technological innovation has changed the financial market significantly with the increasing application of high-frequency data in research and practice. This study examines the performance of intraday implied volatility (IV) in estimating currency options prices. Options quotations at a...

This working paper was written by Patrick Augustin (McGill University and Canadian Derivatives Institute), Mikhail Chernov (University of California Los Angeles, NBER and CEPR), Lukas Schmid (University of Southern California and CEPR) and Dongho Song (Johns Hopkins University).We show...

This paper propounds that the Forward Premium Anomaly (FPA) arises due to misspecification in the extant empirical models, where ratios of the concerned variables are studied instead of their levels themselves. We study these variables directly instead of their ratios for 22 currency pairs from...