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Currency Carry Trades, Position-Unwinding Risk, and Sovereign Credit Premia
Huang, Huichou; MacDonald, Ronald - Volkswirtschaftliche Fakultät, … - 2012
This is the first study that employs option pricing model to measure the position-unwinding risk of currency carry trade portfolios, which covers moment information as the proxy for crash risk. We show that high interest-rate currencies are exposed to higher position-unwinding risk than low...
Persistent link: https://www.econbiz.de/10011107339
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MODELLING THE WORLD EXCHANGE RATES:DYNAMICS, VOLATILITY AND FORECASTING
Nwaobi, Godwin - Volkswirtschaftliche Fakultät, … - 2008
Indeed, the specification of equilibrium in the world economy depends on the exchange rate regime and thus, the early … foreign exchange markets. However, the world has known several exchange rate systems beginning with the fixed-gold standard … exchange was deregulated, independent traders finally had access to the biggest trading market of the world; and these forex …
Persistent link: https://www.econbiz.de/10005619306
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Analogy Making, Option Prices, and Implied Volatility
Siddiqi, Hammad - Volkswirtschaftliche Fakultät, … - 2013
We put forward a new option pricing formula based on the notion that people tend to think by analogies and comparisons. The new formula differs from the Black Scholes formula due to the appearance of a parameter in the formula that captures the risk premium on the underlying. The new formula,...
Persistent link: https://www.econbiz.de/10011112350
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Global Variance Risk Premium and Forex Return Predictability
Aloosh, Arash - Volkswirtschaftliche Fakultät, … - 2014
In a long-run risk model with stochastic volatility and frictionless markets, I express expected forex returns as a function of consumption growth variances and stock variance risk premiums (VRPs)—the difference between the risk-neutral and statistical expectations of market return variation....
Persistent link: https://www.econbiz.de/10011113963
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Global Currency Misalignments, Crash Sensitivity, and Downside Insurance Costs
Huang, Huichou; MacDonald, Ronald; Zhao, Yang - Volkswirtschaftliche Fakultät, … - 2012
We show that the profitability of currency carry trades can be understood as the compensation for exchange rate misalignment risk based on the rare disastrous model of exchange rates (Farhi and Gabaix, 2008). It explains over 97% of the cross-sectional excess returns and dominates other...
Persistent link: https://www.econbiz.de/10011112267
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The Economics of Financial Derivative Instruments
NWAOBI, GODWIN C - Volkswirtschaftliche Fakultät, … - 2008
-changing world characterised by both unprecedented opportunities and unprecedented risks. Thus, the thrust of this paper is to …
Persistent link: https://www.econbiz.de/10005621718
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The Spot Forward Exchange Rate Relation in Indian Foreign Exchange Market - An Analysis
Nath, Golaka - Volkswirtschaftliche Fakultät, … - 2013
Forward exchange rate bias explanation generally falls into two categories – assumption of rational expectation resulting in a risk premium and expectation errors which is systematic. The paper tests the bias in the Indian forward exchange markets using one-month and three month forward...
Persistent link: https://www.econbiz.de/10011111648
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New insights into India’s single stock futures markets
HUNG, MAO-WEI; SO, LEH-CHYAN - Volkswirtschaftliche Fakultät, … - 2009
mechanism. Data from the world’s most active SSF market, the National Stock Exchange (NSE) of India, are used. The results …
Persistent link: https://www.econbiz.de/10011259838
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Hedging Effectiveness under Conditions of Asymmetry
Cotter, John; Hanly, James - Volkswirtschaftliche Fakultät, … - 2007
We examine whether hedging effectiveness is affected by asymmetry in the return distribution by applying tail specific metrics to compare the hedging effectiveness of short and long hedgers using Oil futures contracts. The metrics used include Lower Partial Moments (LPM), Value at Risk (VaR) and...
Persistent link: https://www.econbiz.de/10005837212
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Hedging with Foreign-listed Single Stock Futures
Hung, Mao-wei; Lee, Cheng-few; So, Leh-chyan - Volkswirtschaftliche Fakultät, … - 2005
The objective of this paper is to estimate the hedge ratios of foreign-listed single stock futures (SSFs) and to compare the performance of risk reduction of different methods. The OLS method and a bivariate GJR-GARCH model are employed to estimate constant optimal hedge ratios and the dynamic...
Persistent link: https://www.econbiz.de/10011109598