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Persistent link: https://www.econbiz.de/10001519943
We analyze the factors underlying the recent deviations from covered interest parity. We show that these deviations can be explained by tighter post-crisis bank capital regulations that made the provision of foreign exchange swaps more costly. Moreover, the recent monetary policy and related...
Persistent link: https://www.econbiz.de/10012951417
Over-the-counter (OTC) traders cannot pursue the two fundamental objectives of portfolio management, the identification of portfolio market risk and return and its diversification. The result of this major market shortcoming is a complex, systemically risky market disequilibrium. The tradable...
Persistent link: https://www.econbiz.de/10013019443
The spot foreign exchange marketplaces are split into two types by their respective trading rules: markets with conventional resting orders versus markets with resting orders that include optionality. This optionality is owned by the counterparty who placed the resting order and provides the...
Persistent link: https://www.econbiz.de/10012988431
In this paper, we study the mechanisms that govern price stability of MakerDAO's DAI token, the first decentralized stablecoin. DAI works through a set of autonomous smart contracts, in which users deposit cryptocurrency collateral, typically Ethereum, and borrow a fraction of their positions as...
Persistent link: https://www.econbiz.de/10013222444
Rolling spot forex is a growing business. The key problem is whether it could be classified as a financial instrument or could be classified as gambling contract. Each legal system has different approach. Nevertheless the legal position of rolling spot forex is unclear. This submission is...
Persistent link: https://www.econbiz.de/10013066786
Since the mid 1990s, theories of speculative attacks have argued that fixed exchange rate regimes induce excessive borrowing in foreign currency as an optimal response to implicit guarantees that the government will not devalue the domestic currency. Using data on Brazilian firms before and...
Persistent link: https://www.econbiz.de/10011900117
Restrictions on international capital transactions and other payments are usually designed to limit volatile short-term capital flows ( hot money ) and stabilize the exchange rate. Their imposition, however, may have the opposite effect by inadvertently signaling the continuation of...
Persistent link: https://www.econbiz.de/10011536657
This paper analyzes whether and how central banks can use currency options to lower exchange rate volatility and maintain (implicit) target zones in foreign exchange markets. It argues that selling rather than buying options will result in market makers dynamically hedging their long option...
Persistent link: https://www.econbiz.de/10013212109
Measures of U.S. government policy approval, such as U.S. Presidential or Congressional ratings, are strongly related to persistent fluctuations in the dollar exchange rates. Contemporaneous correlations between approval ratings and the dollar value reach 50% against the advanced economy...
Persistent link: https://www.econbiz.de/10012941029