Time-varying/sign-switching Risk Perception on Foreign Exchange Markets PDF Download

Author: Giampiero M. Gallo
Publisher:
ISBN:
Category : Foreign exchange futures
Languages : en
Pages : 56

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Author: Giampero M. Gallo
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Giampiero M. Gallo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Giampiero M. Gallo
Publisher:
ISBN:
Category : Asymptotic distribution (Probability theory)
Languages : en
Pages : 64

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Author: Romain Lafarguette
Publisher: International Monetary Fund
ISBN: 1513569406
Category : Business & Economics
Languages : en
Pages : 33

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This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.

Author: Alberto Giovannini
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 56

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Recent empirical work indicates that, in a variety of financial markets, both conditional expectations and conditional variances of returns are time- varying. The purpose of this paper is to determine whether these joint fluctuations of conditional first and second moments are consistent with the Sharpe-Lintner-Mossin capital-asset-pricing model. We test the mean-variance model under several different assumptions about the time-variation of conditional second moments of returns, using weekly data from July 1974 to December 1986, that include returns on a portfolio composed of dollar, Deutsche mark, Sterling, and Swiss franc assets, together with the US stock market. The model is estimated constraining risk premia to depend on the time-varying conditional covariance matrix of the residuals of the expected returns equations. The results indicate that estimated conditional variances cannot explain the observed time-variation of risk premia. Furthermore, the constraints imposed by the static CAPH are always rejected.

Author: Geert Bekaert
Publisher:
ISBN:
Category : Foreign exchange
Languages : en
Pages : 30

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Author: William Dean Lastrapes
Publisher:
ISBN:
Category :
Languages : en
Pages : 208

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Author: Geert Bekaert
Publisher:
ISBN:
Category :
Languages : en
Pages :

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This paper investigates the statistical properties of high frequency nominal exchange rates and forward premiums in the context of a dynamic two-country general equilibrium model. Primary focus is on the persistence, variability, leptokurtosis and conditional heteroskedasticity of exchange rates and on the behavior of foreign exchange risk premiums. The model combines temporal dependencies in preferences with a transaction cost technology that generates a role for money. Agents in the economy make decisions on a weekly frequency and face shocks which display time-varying uncertainty. Simulations reveal that the model accounts for the statistical properties of exchange rate data much more accurately than previous structural models

Author: Pamela H. Chang
Publisher:
ISBN:
Category : Foreign exchange market
Languages : en
Pages : 33

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