Two 'event' scales for financial markets, called 'scale of market shocks' (SMS), are introduced, which measure the importance of the market movements. These indices are based on the price volatility and are computed by integrating mapped asset volatilities over time horizons that range from 1...

Foreign exchange rates can be subject to considerable daily fluctuations (up to 5 percent within one day). This can, in certain cases, cause serious losses on open overnight positions. Given a maximum tolerable loss for a company, limits have to be set on open overnight positions in foreign...

Estimates of daily volatility are investigated. Realized volatility can be computed from returns observed over time intervals of different sizes. For simple statistical reasons, volatility estimators based on high-frequency returns have been proposed, but such estimators are found to be strongly...

We construct a gold valuation theory based on viewing gold as a global real store of wealth. We show that the real price of gold varies inversely to the stock market P/E and thus is a direct function of a global yield required to achieve a constant real after-tax return equal to long-term global...

The hypothesis put forth is that the U.S. dollar's role as a vehicle currency in global foreign exchange markets is linked to the low cost of payments-related intraday credit. After reviewing the types of intraday credit facilities extended to participants on payment systems settling the major...

Accurate modeling of extreme price changes is vital to financial risk management. We examine the small sample properties of adaptive tail index estimators under the class of student-t marginal distribution functions including GARCH and propose a model-based bias-corrected estimation approach....

Capital markets and their related financial instruments make an important contribution to the welfare of Canadians. The Bank of Canada is interested in the efficient functioning of capital markets through each of its responsibilities for monetary policy, the financial system, and funds...

The desirability of a transactions tax in the foreign exchange market, or Tobin tax, depends on whether the tax deters short-term, destabilizing trade. While supporters claim that the tax would be a deterrent for short-term capital flows, critics contend that the deterrent capability of the tax...

This five-chapter introduction into international money and foreign exchange markets covers all the basics, theoretical, institutional, as well as empirical. After a brief review of the money market, we discuss the size and structure of the foreign exchange markets. This information is then used...

The real value of the U.S. dollar and the level of U.S. foreign direct investment (FDI) have shown a strong correlation since the 1970s. Previous empirical studies on this relationship use primarily national or industry level data. This study uses firm-level data to test the hypothesis that...