Röthig, Andreas (2004)
Currency futures and currency crises.
Report, Bibliographie
Kurzbeschreibung (Abstract)
Since financial derivatives are key instruments for risk taking as well as risk reduction, it is only straightforward to examine their role in currency crises. This paper addresses this issue by investigating the impact of currency futures trading on the underlying exchange rates. After a discussion of trading mechanisms and trader types, the linkage between futures trading activity and spot market turbulence is modelled using a VAR-GARCH approach for the exchange rates of Australia, Canada, Japan, Korea and Switzerland in terms of the US dollar. The empirical results indicate that there is a positive relationship between currency futures trading activity and spot volatility. Moreover, in the case of four out of the total of five currencies discussed in this paper, futures trading activity adds significantly to spot volatility.
| Typ des Eintrags: | Report |
|---|---|
| Erschienen: | 2004 |
| Autor(en): | Röthig, Andreas |
| Art des Eintrags: | Bibliographie |
| Titel: | Currency futures and currency crises |
| Sprache: | Englisch |
| Publikationsjahr: | Mai 2004 |
| Ort: | Darmstadt |
| Reihe: | Darmstadt Discussion Papers in Economics |
| Band einer Reihe: | 136 |
| Kollation: | 38 S. |
| URL / URN: | http://econstor.eu/bitstream/10419/22519/1/ddpie_136.pdf |
| Kurzbeschreibung (Abstract): | Since financial derivatives are key instruments for risk taking as well as risk reduction, it is only straightforward to examine their role in currency crises. This paper addresses this issue by investigating the impact of currency futures trading on the underlying exchange rates. After a discussion of trading mechanisms and trader types, the linkage between futures trading activity and spot market turbulence is modelled using a VAR-GARCH approach for the exchange rates of Australia, Canada, Japan, Korea and Switzerland in terms of the US dollar. The empirical results indicate that there is a positive relationship between currency futures trading activity and spot volatility. Moreover, in the case of four out of the total of five currencies discussed in this paper, futures trading activity adds significantly to spot volatility. |
| Freie Schlagworte: | Currency crises; Exchange rate volatility; Currency futures trading activity; VAR-GARCH estimation |
| Zusätzliche Informationen: | JEL Classification: C13, C32, F31, G15 |
| Fachbereich(e)/-gebiet(e): | 01 Fachbereich Rechts- und Wirtschaftswissenschaften 01 Fachbereich Rechts- und Wirtschaftswissenschaften > Volkswirtschaftliche Fachgebiete 01 Fachbereich Rechts- und Wirtschaftswissenschaften > Volkswirtschaftliche Fachgebiete > Fachgebiet Makroökonomie und Finanzmärkte |
| Hinterlegungsdatum: | 19 Nov 2008 15:59 |
| Letzte Änderung: | 03 Jun 2018 21:21 |
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