In this article, we take the funding liquidity risk into account when determining the optimal liquidity reserve ratio for a commercial bank. A simple continuous-time model is developed, and a discrete-time model is built as a benchmark. We find that compared with the continuous-time model, the...

We build a Markov regime switching model to examine the role of heterogeneous expectations in the forward exchange market, where the regime could be fundamentalists or chartists. Our empirical analysis of EUR/USD and USD/JPY forward markets suggest that the fundamen-talists who follow negative...

This article investigates how the jump in the exchange rate and risky asset can affect the central bank's foreign management. We find that the jump in the exchange rate has a positive impact on the need for the risky asset, whereas the jump in the risky asset has a negative impact. However, the...