scholarly journals Value at risk using smoothing techniques: a proposal in the foreign exchange market

2018 ◽  
Vol 16 (2) ◽  
pp. 99-110
Author(s):  
Jorge Luis Reyes García ◽  
Arturo Morales Castro
Keyword(s):  
At Risk ◽  
Monte Carlo ◽  
Exchange Rate ◽  
Value At Risk ◽  
Foreign Exchange Market ◽  
Financial Assets ◽  
Exchange Market ◽  
Historical Simulation ◽  
Simulation Monte Carlo ◽  
The Exchange Rate

One of the main problems that are exposed companies and financial institutions in Mexico is the volatility in the exchange rate Peso/Dollar when operating or in the valuation of financial assets. This article analyzes and compares the behavior of value at risk [VAR] under three different methodologies: historical simulation, Monte Carlo Simulation and straightening. An application to the exchange rate in periods of Precrisis, Postcrisis and economic crisis of 2008 is performed to look at the implications of the VAR calculation. We conclude that the straightening VAR methodology is more accurate.ResumenUno de los principales problemas a los que se encuentran expuestas las empresas e instituciones financieras en México es la volatilidad en el tipo de cambio Peso/Dólar al realizar operaciones o en la valuación de activos financieros. En el presente artículo se analiza y se compara el comportamiento del Valor en Riesgo [VAR] bajo tres metodologías diferentes: Simulación Histórica, Simulación Montecarlo y Alisado. Se realiza una aplicación al tipo de cambio en los periodos de Precrisis, Crisis y Postcrisis económica de 2008 para observar las implicaciones del cálculo del Valor en Riesgo. Se concluye que la metodología del VAR alisado es más precisa.ResumoUm dos principais problemas que são expostos empresas e instituições financeiras no México é a volatilidade na taxa de câmbio Peso / dólar para executar operações ou valorização dos activos financeiros. Neste artigo vamos analisar o valor comportamento e comparados at risk [ VaR ] em três diferentes metodologias : Simulação histórica , Simulação de Monte Carlo e alisamento. é realizada uma aplicação à taxa durante os períodos de crise Pre, Crise crise económica e Pós 2008 para observar as implicações de Value at Risk cálculo . Concluiu- se que a metodologia VaR alisamento é mais preciso.

Optimistic and pessimistic economic sentiments and US Dollar exchange rate

2021 ◽  
Author(s):  
Sonia Kumari ◽  
Suresh Kumar Oad Rajput ◽  
Rana Yassir Hussain ◽  
Jahanzeb Marwat ◽  
Haroon Hussain
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Ordinary Least Squares ◽  
Exchange Market ◽  
Dollar Exchange Rate ◽  
The Us ◽  
Short Run ◽  
Us Dollar ◽  
The Exchange Rate

This study investigates the affiliation of various proxies of economic sentiments and the US Dollar exchange rate, mainly focusing on the real effective exchange rate of USD pairing with three other major currencies (USDEUR, USDGBP, and USDCAD). The study has employed Google Trends data of economy optimistic and pessimistic sentiments index and survey-based economy sentiments data on monthly basis from January 2004 to December 2018. The study engaged Ordinary Least Squares (OLS) and Auto-Regressive Distributed Lag (ARDL) estimation techniques to evaluate the short-run and long-run effects of economy-related sentiments and macroeconomic variables on the exchange rate. The results from the study found that Economy Optimistic Sentiments Index (EOSI) and Economy Pessimistic Sentiments Index (EPSI) appreciate and depreciate the US Dollar exchange rate in the short-run, respectively. Our sentiment measures are robust to survey-based Michigan Consumer Sentiment Index (MSCI), Consumer Confidence Index (CCI), and various macroeconomic factors. The MSCI and CCI sentiments show a long-term impact on the foreign exchange market. This study implies that economic sentiments play a vital role in the foreign exchange market and it is essential to consider behavioral aspects when modeling the exchange rate movements.

scholarly journals The “day-of-the-week” effects in the exchange rate of Latin American currencies

2019 ◽  
Vol 14 (PNEA) ◽  
pp. 485-507
Author(s):  
Roberto Joaquín Santillán Salgado ◽  
Alejandro Fonseca Ramírez ◽  
Luis Nelson Romero
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Latin American ◽  
Foreign Exchange Market ◽  
The United States ◽  
Management Decision ◽  
Exchange Market ◽  
Day Of The Week ◽  
The Exchange Rate

This paper examines the “day-of-the-week” anomaly in the foreign exchange market of six major Latin American countries’ currencies: (Argentina, Brazil, Chile, Colombia, Mexico, and Peru), all with respect to the United States’ dollar. The returns of daily exchange rates are stationary, so we use linear regressions combined with GARCH, TARCH and EGARCH models to explore the presence of the “day-of-the-week” anomaly. The results confirm the presence of “abnormal” effects in some of the currencies and in some days of the week, particularly on Fridays and Mondays. Moreover, volatility in exchange rates shows clustering behavior, as well as leverage effects, which are carefully modelled in our analysis. This paper contributes to the literature by studying the “day-of-the-week” effects in currency exchange rate markets, a clear innovation with respect to the typical stock market analysis. The results reported are useful for foreign exchange market traders, currency exposure management decision makers, monetary authorities, and financial policy designers in the countries included in the study. Indeed, the results suggest the presence of a typical behavior of the exchange rate of all the currencies included in the sample.

scholarly journals Role of Oil Prices in Exchange Rate Devaluation: Risks of the Russian Ruble and Other Currencies

2019 ◽  
Vol 16 (4) ◽  
pp. 76-81
Author(s):  
V. Yu. Didenko ◽  
N. I. Morozko ◽  
N. I. Morozko
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Current Account ◽  
Foreign Exchange Market ◽  
Oil Prices ◽  
Balance Of Payments ◽  
Exchange Market ◽  
The Exchange Rate

Subject and topic. Currently, the decrease in payments on foreign debts and a decrease in imports have an impact on the demand in the foreign exchange market. As a result, a situation has arisen due to the actions of the Bank of Russia, caused by threats of sanctions that provoked the absence of excessive demand and adequate supply in the foreign exchange market and led to a decrease in ruble exchange rate fl uctuations due to oil price movements.The subject of research is to determine the role of oil prices in the formation of monetary policy, which can be a key driver of economic growth.Objective. Identifi cation of exchange rate management practices with the search for the relationship between the current account of the balance of payments and the volatility of the national currency exchange rate.Research methods, the main provisions. Methods used grouping, comparing and summarizing economic indicators to study the characteristics and trends of the monetary policy of China, South Korea and Latin American countries.A critical analysis of the various points of view of leading scientists on the negative or positive impact of the exchange rate on the development of the economy was carried out. At the same time, it is interesting to analyze the views of individual economists that the dependence of the ruble exchange rate on oil prices has recently largely decreased.The main results of the study. Determination of the theoretical relationship between the price of oil and the exchange rate, based on the shock component, either in oil prices or in the exchange rate, with testing the response of the economic variable to this shock.Main conclusions. It was concluded that in the conditions of the economic situation of the last decade, the main problem of export-oriented and import-oriented countries is the imbalance of the current account of the balance of payments, as well as its relationship, primarily with the prices of export goods.

The Effectiveness of Fed Intervention on the USD/DM Foreign Exchange Market

2006 ◽  
Vol 6 (2) ◽  
pp. 1850088 ◽  
Author(s):  
Zhaodan Huang ◽  
Stephen Neun
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Policy Option ◽  
Exchange Market ◽  
Event Window ◽  
Study Approach ◽  
Exchange Rate Movements ◽  
The Exchange Rate ◽  
Exchange Rate Level

This study empirically examines the effectiveness of Fed intervention on the USD/DM exchange market using an event study approach. The event window is defined as 4 (8) days prior/post an intervention. Based on the empirical analysis, the results show that when the Fed follows an "against the wind" policy, exchange rate movements are smoothed and may switch direction. The results are robust and hold for different event window definitions and sample ranges. To test whether the results are due to the exchange rate movement itself, we conduct a simple test using customer trades by the Fed. The results do not exhibit a systematic pattern. We also find that a joint intervention has a stronger impact on the exchange rate level when the Fed buys US dollars. The policy implication of our findings is that intervention in foreign exchange markets on the part of the Fed to impact the value of the US dollar is a viable policy option.

scholarly journals How could we observe change of the exchange rate? Review of selected factors of influence on foreign exchange market

Revizor ◽  
2020 ◽  
Vol 23 (91-92) ◽  
pp. 77-85
Author(s):  
Milorad Stamenović ◽  
Sanja Jelisavac-Trošić
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Risk Exposure ◽  
Exchange Market ◽  
Management Measures ◽  
Factors Of Influence ◽  
The Exchange Rate ◽  
The Impact ◽  
Significant Factors

This paper defines the participants in the international foreign exchange market and the influence of natural, political, and economic factors on the movement of the exchange rate, and analysis of circumstances that may contribute to the change of the exchange rate. The paper aims to present the analysis of the exchange rate through macroeconomic phenomena and define the factors influencing the change in the exchange rate and the impact on the work of participants in that process. As risk management measures can prevent the influence of significant factors defined in the paper, measures, and types of risk exposure are determined.

scholarly journals Foreign exchange market interventions and the $–¥ exchange rate in the long run

2015 ◽  
Vol 47 (38) ◽  
pp. 4037-4055
Author(s):  
Joscha Beckmann ◽  
Ansgar Belke ◽  
Michael Kühl
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
Long Run ◽  
The Exchange Rate

scholarly journals Forecasting Value at Risk: Evidence from Emerging Economies in Asia

2018 ◽  
Vol 2 (1) ◽  
pp. 77-90
Author(s):  
Le Trung Thanh ◽  
Nguyen Thi Ngan ◽  
Hoang Trung Nghia
Keyword(s):  
At Risk ◽  
Monte Carlo ◽  
Stock Returns ◽  
Emerging Economies ◽  
Value At Risk ◽  
Stock Index ◽  
Historical Simulation ◽  
Out Of Sample ◽  
Student’S T ◽  
T Distribution

In this paper, various Value-at-Risk techniques are applied to stock indices of 9 Asian emerging financial markets. The results from our selected models are then backtested by Unconditional Coverage, Independence, Joint Tests of Unconditional Coverage and Independence and Basel tests to ensure the quality of Value-at-Risk (VaR) estimates. The main conclusions are: (1) Timevarying volatility is the most important characteristic of stock returns when modelling VaR; (2) Financial data is not normally distributed, indicating that the normality assumption of VaR is not relevant; (3) Among VAR forecasting approaches, the backtesting based on in- and out-of-sample evaluations confirms its superiority in the class of GARCH models; Historical Simulation (HS), Filtered Historical Simulation (FHS), RiskMetrics and Monte Carlo were rejected because of its underestimation (for HS and RiskMetrics) or overestimation (for the FHS and Monte Carlo); (4) Models under student’s t and skew student’s t distribution are better in taking into account financial data’s characters; and (5) Forecasting VaR for futures index is harder than for stock index. Moreover, results show that there is no evidence to recommend the use of GARCH (1,1) to estimate VaR for all markets. In practice, the HS and RiskMetrics are popularly used by banks for large portfolios, despite of its serious underestimations of actual losses. These findings would be helpful for financial managers, investors and regulators dealing with stock markets in Asian emerging economies.  

scholarly journals Foreign Exchange Market Intervention and Exchange Rate Stability: An Empirical Anayisis for Nigeria

2021 ◽  
pp. 34-45
Author(s):  
E. Adedeji Kayode ◽  
O. Apinran Martins ◽  
I. Awoniyi Bisola
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Series Data ◽  
Exchange Market ◽  
Market Intervention ◽  
The Exchange Rate ◽  
The Impact ◽  
Foreign Exchange Market Intervention ◽  
Exchange Market Intervention

The essential roles played by exchange rate on general macroeconomic stability has attracted the Central Bank of Nigeria (CBN) to intervene in the foreign exchange market, in order to smoothen exchange rate volatility, among other goals. The study to examine the impact of foreign exchange market intervention on stability of exchange rate in Nigeria with a monthly time series data from 2000M1 to 2020M12. The research employs the use of Autoregressive Distributive Lag approach (ARDL) of analysis. The result indicates that the currency interventions policy of the CBN in Nigeria is effective and exerts significant impact on the exchange rate stability of Naira in both in the short and long-run within the period under investigation. We, therefor, recommend that the monetary authority should continue to employ the usage of stock of foreign reserves in supporting the exchange rate by increasing funding of the operations in foreign exchange market.

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