Download or read book Crash Risk in Currency Markets written by Emmanuel Farhi and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the Fall of 2008, out-of-the money puts on high interest rate currencies have become significantly more expensive than out-of-the-money calls, suggesting a large crash risk of those currencies. To evaluate crash risk precisely, we propose a parsimonious structural model that includes both Gaussian and disaster risks and can be estimated even in samples that do not contain disasters. Estimating the model for the 1996 to 2014 sample period using monthly exchange rate spot, forward, and option data, we obtain a real-time index of the compensation for global disaster risk exposure. We find that disaster risk accounts for more than a third of the carry trade risk premium in advanced countries over the period examined. The measure of disaster risk that we uncover in currencies proves to be an important factor in the cross-sectional and time-series variation of exchange rates, interest rates, and equity tail risk.
Download or read book Crash Risk in Currency Markets written by and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: How much of carry trade excess returns can be explained by the presence of disaster risk? To answer this question, we propose a simple structural model that includes both Gaussian and disaster risk premia and can be estimated even in samples that do not contain disasters. The model points to a novel estimation procedure based on currency options with potentially different strikes. We implement this procedure on a large set of countries over the 1996--2008 period, forming portfolios of hedged and unhedged carry trade excess returns by sorting currencies based on their forward discounts. We find that disaster risk premia account for about 25% of expected carry trade excess returns in advanced countries.
Download or read book Crash Risk in Currency Markets written by Sofia Cazzaniga and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Introduction to Currency Risk written by Alastair Graham and published by Routledge. This book was released on 2013-11-26 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Currency Risk Management series offers readers, researchers, and financial professional a time-tested training tool for understanding and working in the increasingly complex currency markets. This series breaks new ground in simplicity, clarity, and ease of application in risk management practice.
Download or read book The Behavior of Currencies during Risk off Episodes written by Mr.Reinout De Bock and published by International Monetary Fund. This book was released on 2013-01-11 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: Episodes of increased global risk aversion, also known as risk-off episodes, have become more frequent and severe since 2007. During these episodes, currency markets exhibit recurrent patterns, as the Japanese yen, Swiss franc, and U.S. dollar appreciate against other G-10 and emerging market currencies. The pattern of these moves can be explained by a combination of fundamental factors, such as the nominal interest rate, the international investment position and measures of exchange rate misalignment, and market-liquidity factors, such as bid-offer spreads and restrictions on international capital flows. We also find that currency performance in a risk-off episode has become more related to a currency?s yield and relationship to broader risks in recent years.
Download or read book Exchange Rate Solutions with Currency Crashes written by Cho H. Hui and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Currencies After the Crash The Uncertain Future of the Global Paper Based Currency System written by Sara Eisen and published by McGraw Hill Professional. This book was released on 2012-10-26 with total page 289 pages. Available in PDF, EPUB and Kindle. Book excerpt: From the brightest minds in the field—a revealing look at how countries use their currencies to achieve prosperity . . . and the coming repercussions Bloomberg Television's Sara Eisen sheds light on the complex global financial system through this illuminating collection of essays. She hand selected the crème de la crème of authors from the world's most prestigious academic institutions and esteemed professional organizations to share—for the first time in print—their observations and deductions on the topics that matter most to you and your future wealth, including: • THE RELATIONSHIP BETWEEN CURRENCIES AND FINANCIAL CRISES • THE FLAWS WITHIN THE INTERNATIONAL EXCHANGE RATE SYSTEM AND THEIR CONSEQUENCES • HOW EMERGING MARKETS FIT INTO THE CURRENT AND FUTURE EXCHANGE RATE FRAMEWORK • THE IMPACT EXCHANGE RATES HAVE ON FREE TRADE AND ECONOMIC GROWTH • WHAT DEFINES A "SAFE HAVEN" CURRENCY AND ITS ROLE • POTENTIAL SOLUTIONS TO THE CURRENT ECONOMIC PROBLEMS "Today's fiat currency system is based upon trust among market participants, politicians, and central bankers--and that trust is assembled around the reserve currency that enjoys an exorbitant privilege. The reserve status is in doubt in a post financial crisis era but alternatives are lacking. . . . This book is a great guide on how the global currency system is morphing into apotential new standard, but not without the necessary volatility."—Ben Emons, Senior Vice President, Portfolio Manager, PIMCO
Download or read book The Behavior of Currencies during Risk off Episodes written by Mr.Reinout De Bock and published by International Monetary Fund. This book was released on 2013-01-11 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Episodes of increased global risk aversion, also known as risk-off episodes, have become more frequent and severe since 2007. During these episodes, currency markets exhibit recurrent patterns, as the Japanese yen, Swiss franc, and U.S. dollar appreciate against other G-10 and emerging market currencies. The pattern of these moves can be explained by a combination of fundamental factors, such as the nominal interest rate, the international investment position and measures of exchange rate misalignment, and market-liquidity factors, such as bid-offer spreads and restrictions on international capital flows. We also find that currency performance in a risk-off episode has become more related to a currency?s yield and relationship to broader risks in recent years.
Download or read book Determinants of the Exchange Rate Its Volatility and Currency Crash Risk in Africa s Low and Lower Middle income Countries written by Anjelo Okot and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The last three decades have witnessed substantial changes in the foreign exchange markets in Africa, with moves towards liberalisation and flexible exchange rate regimes. This has increased the influence of financial market conditions and heightened the risk of exchange rate volatility and large and sudden exchange rate movements. This paper investigates the determinants of nominal exchange rates, their volatility, and crash risk in African lower and lower-middle income countries. It combines macro-panel estimations for 15 such countries with insights from interviews with market participants. It shows the importance of these countries' distinctive export structure, concentrated in a few agricultural and mineral-based commodities, as well as recent financial integration, for exchange rate determination. It finds that terms of trade, export concentration, and export prices have a significant impact on the exchange rate level and volatility. By contrast, financial factors including the interest rate differential, international market conditions, and short-term financial flows, influence the likelihood of sudden and large exchange rate movements".
Download or read book Money Greed and Risk written by Charles R. Morris and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume chronicles the evolution of modern financial markets against the backdrop of some of the finance world's most infamous crises. Financial periods are intricately and historically examined, simplifying the financial instruments and techniques so that even the non-financial reader can identify the pattern that Morris uncovers in the lead up to a crisis.
Download or read book Predicting Emerging Market Currency Crashes written by Manmohan S. Kumar and published by International Monetary Fund. This book was released on 2002 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the extent to which crashes in emerging market currencies are predictable using simple logit models based on lagged macroeconomic and financial data. To evaluate our model, we calculate trading strategies in which an investor goes long or short in the currency depending on whether crash probabilities are low or high. When we estimate the model on part of the data and then use the parameter estimates to generate predictions for the remainder of the sample, we find that substantial profits may be made. Furthermore, the model correctly forecasts major crashes even on an out-of-sample basis.
Download or read book Currency Risk Premia in Global Stock Markets written by Shaun K. Roache and published by International Monetary Fund. This book was released on 2006-08 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption.
Download or read book Euro Crash Risk written by Roman Kräussl and published by . This book was released on 2017 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We identify crucial events during the European sovereign debt crisis and investigate their impact on the euro currency. In particular, we analyze how specific announcements related to vulnerable Eurozone member states, European Central Bank (ECB) actions, and credit rating downgrades affect the value and the crash risk of the euro. We proxy the value changes of the euro by its abnormal foreign exchange (FX) rate returns with respect to 35 currencies. The crash risk of the euro is proxied by the conditional skewness of the FX rate return distribution with respect to the same currencies. We find that the market reacts positively to news related to countries under the European and International Monetary Fund (IMF) rescue umbrella. We discover that ECB actions on average result in a euro depreciation on the day of the announcement reflecting obvious concerns of market participants, but the effect is partly corrected the day after. Our analysis also shows that sovereign and corporate credit rating downgrades tend to lead to a depreciation of the euro and, more importantly, to an increase of the euro crash risk. Interestingly, we find that specific announcements about Greece on average do not substantially affect the euro exchange rate directly, however, it does have an overall significant effect on the euro crash risk, imposing a substantial risk for the stability of the common currency in the Eurozone.
Download or read book What Drives Currency Markets written by Brian Kettell and published by Financial Times/Prentice Hall. This book was released on 2000 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this text is to place readers in the ideal position to assess new market moves quickly and accurately, interpret market indicators correctly, anticipate others' moves while there's still time to profit and avoid being caught out by sharp price moves in rapidly changing financial markets.
Download or read book Crash Risk in Currency Markets written by Emmanuel Farhi and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since the Fall of 2008, out-of-the money puts on high interest rate currencies have become significantly more expensive than out-of-the-money calls, suggesting a large crash risk of those currencies. To evaluate crash risk precisely, we propose a parsimonious structural model that includes both Gaussian and disaster risks and can be estimated even in samples that do not contain disasters. Estimating the model for the 1996 to 2014 sample period using monthly exchange rate spot, forward, and option data, we obtain a real-time index of the compensation for global disaster risk exposure. We find that disaster risk accounts for more than a third of the carry trade risk premium in advanced countries over the period examined. The measure of disaster risk that we uncover in currencies proves to be an important factor in the cross-sectional and time-series variation of exchange rates, interest rates, and equity tail risk.
Download or read book Currency Risk Management written by Gary Shoup and published by Routledge. This book was released on 1998 with total page 247 pages. Available in PDF, EPUB and Kindle. Book excerpt: While white racism has global dimensions, it has an unshakeable lease on life in South African political organizations and its educational system. Donnarae MacCann and Yulisa Maddy here provide a thorough and provocative analysis of South African children's literature during the key decade around Nelson Mandela's release from prison. Their research demonstrates that the literature of this period was derived from the same milieu -- intellectual, educational, religious, political, and economic -- that brought white supremacy to South Africa during colonial times. This volume is a signal contribution to the study of children's literature and its relation to racism and social conditions.
Download or read book Currency Carry Trades and Funding Risk written by Sara Ferreira Filipe and published by . This book was released on 2014 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we measure currency carry trade funding risk using stock market volatility and crash risk in Japan, the main funding currency country. We show that the measures of funding risk in Japan can explain 42% of the monthly currency carry trade returns during our sample period, 2000-2011. In addition, they explain 64% of the monthly foreign exchange volatility in our sample of ten main currencies, 28% of the speculators' net currency futures positions in Australian dollar versus Japanese yen, skewness in currency returns and currency crashes. We present a theoretical model that is consistent with these findings.
