FX pricing processes are nonstationary and their frequency characteristics are time-dependent. Most do not conform to geometric Brownian motion, since they exhibit a scaling law with a Hurst exponent between zero and 0.5 and fractal dimensions between 1.5 and 2. This paper uses wavelet...

Asset returns conforming to a Gaussian random walk are characterised by the temporal independence of the moments of the distribution. Employing currency returns, this note demonstrates the conditions that are necessary for risk to be estimated in this manner.

A power law typically governs the tail decay of financial returns but the constancy of the so-called tail index which dictates the tail decay remains relatively unexplored. We study the finite sample properties of some recently proposed endogenous tests for structural change in the tail index....

The local Hurst exponent, a measure employed to detect the presence of dependence in a time series, may also be used to investigate the source of intraday variation observed in the returns in foreign exchange markets. Given that changes in the local Hurst exponent may be due to either a...

This paper uses a microstructure approach to analyze the effectiveness of capital controls introduced in Brazil to counter an appreciation of the Real. Based on a rich data set from the Brazilian foreign exchange market, we estimate a reduced-form VAR to characterize the interaction of the...

The development of Asian foreign exchange markets has progressed appreciably in recent years. Data from the BIS Triennial Central Bank Survey indicate that the turnover of Asian currencies rose sharply between 2004 and 2007, financial institutions became more important customers, and the...

This paper examines the influence of oil prices on Canadian stock market using the cause-effect relationship between oil prices and the TSX index. Additionally, the relationship between the Canadian to US Dollar exchange rate and the TSX index was investigated. Results show that in the last...

This text presents a study of various models based on jump processes in the context of foreign exchange (FX) rates modeling. Quality of FX rate log-returns fit is assessed for models such as Merton and Kou jump-diffusions, normal inverse Gaussian, variance gamma, and Meixner. The study is...

This paper analyzes a stylized theoretical framework to examine optimal portfolio selection in an international context with an explicit focus on the effect of the exchange rate. More specifically, we study how the elimination of the exchange rate induces shifts in the optimal international...

We study dealer behavior in the foreign exchange spot market using a detailed data set on the complete transactions of four dealers. There is strong support for an information effect in incoming trades. Although there is evidence that the information effect increases with trade size in direct...