We assess the role played by exchange rates in buffering or amplifying the propagation of shocks across international equity markets. Using copula functions we model the joint dependence between exchange rates and two global equity markets and, from a copula framework, we obtain the conditional...

Combinations of a six-Currency portfolio are studied for a two-year period to access the reliability of “value at risk” approach to measuring the transaction exposure. The values at risk for each currency and for every additional currency portfolio are estimated for each year. The outcomes...

This paper offers a detailed investigation of the foreign exchange risk premium using a structural relationship in the inflation-index bond market, firstly introduced by Clarida (2012). Unlike the conventional VAR approach, this approach estimates risk premium through the non-arbitrage...

Dornbusch’s exchange rate overshooting hypothesis is a central building block in international macroeconomics. Yet, empirical studies of monetary policy have typically found exchange rate effects that are inconsistent with overshooting. This puzzling result has developed into a “styled...

[...] The objective of this study is to analyse - relying on 2006 data - FX settlement risk that may arise in the domestic banking system under its current operations, and to chart the changes which took place after 2000, covering improvements and, if necessary, formulating (new) recommendations...

Corporate FX risk management has gained complexity with increased number of currencies involved and varying correlations among them. Existing literature has highlighted the need to account for cross-currency correlations when optimizing hedge ratios for portfolio management (Dowd, 1999). In this...

Traditional Monte Carlo simulation using linear correlations induces estimation bias in measuring portfolio value-at-risk (VaR) due to the well-documented existence of fat-tail, skewness, truncations, and non-linear relations of return distributions. In this paper, we evaluate the effectiveness...

This article presents an overview of widely practiced short-term multi-currency investment strategies such as carry trade, momentum and term spread strategies. We provide evidence on their downside risk properties and illustrate their performance over historical episodes of financial market...

We analyse carry trades involving the Australian dollar, Indonesian rupiah, Indian rupee, New Zealand dollar and Philippine peso as target currencies. We find evidence supporting the view that downside risk is an important feature of such strategies and propose ways of measuring this risk