In this note we demonstrate that in affine models for bilateral exchange rates, the nature of return interdependence during crises depends on the tail properties of the fundamentals' distributions. We denote crisis linkages as either strong or weak, in the sense that the dependence remains or...

Over the last two decades, a number of financial disasters have occurred due to failure in risk management procedures. If some, as the Asian financial crisis, had a very much more muted global impact (even though they sent shock waves through global financial markets, the main damage were fairly...

After remaining close to 1 US Dollar since its inception in November 2020, the algorithmic stablecoin UST crashed in the two weeks of May 9th to May 15th, 2022, leading to a price collapse of the underlying LUNA token and the erasure of more than 50 Billion U.S. Dollar or 90% in market value

Systematic risk factors are very important for economies and their impact becomes significant especially in a crisis period. One of the systematic risk factors is exchange rate risk and exchange market pressure (EMP) is taken as an indicator of exchange rate risk. In this study, we have analysed...

This paper examines the effects of financial crises on the long memory volatility dependency of daily exchange returns focusing on the Asian crisis in 97-98 and the Global crisis in 08-09. By using the daily KRW-USD and JPY-USD exchange rates which have different trading regions and volumes,...

Purpose: The purpose of this paper is to answer the following question: How did the standard and non-standard ECB policy measures influence the price level and the EUR/USD rate of exchange in the period 2008-2013? Design/methodology/approach: We formulated the following hypothesis: Depreciation...

Fragility that periodically erupts into a full-blown financial crisis appears to be an integral feature of market-based financial systems in spite of the emergence of sophisticated risk management tools and regulatory systems. If anything, the increased frequency of modern crises underscores how...

This paper investigates the interdependence of US dollar exchange rates expressed in other major currencies. Focusing on different phases of the Global Financial Crisis (GFC) and the Eurozone Sovereign Debt Crisis (ESDC), we adopt a dynamic conditional correlation model into a multivariate...

Currency and financial turmoils in international capital markets have been the focus of an extensive theoretical research which started around 30 years ago. This paper provides a synthetic overview of this theoretical modeling. We analyze the basic analytical framework corresponding to the...

This paper examines the time-varying conditional correlations of daily European equity market returns during the Irish sovereign debt crisis. A dynamic conditional correlation (DCC) multivariate GARCH model is used to estimate to what extent the collapse of Irish equity markets and subsequent...