scholarly journals Money and Foreign Exchange Markets Dynamics in Nigeria: A Multivariate GARCH Approach

2021 ◽  
Vol 12 (No. 1) ◽  
pp. 109-138
Author(s):  
Ngozi V. Atoi ◽  
Chinedu G. Nwambeke
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Garch Model ◽  
Money Market ◽  
Multivariate Garch ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Dynamic Correlation

This study examines money market and foreign exchange market dynamics in Nigeria by estimating the dynamic correlation and volatility spillovers between Nigeria Naira/US Dollar Bureau De Change (BDC) exchange rate and interbank call rate with data from January 2007 to August 2019. The study employs a dynamic conditional correlation form of GARCH model (DCC-GARCH) to access the nature of correlation, while an unrestricted bivariate BEKK-GARCH (1, 1) form of multivariate GARCH model is utilized to investigate shocks and volatility spillover of the rates. The estimated DCC-GARCH (1, 1) reveals that interest rate and exchange rate are dynamically linked negatively, suggesting that exchange rate (or interest rate) is inversely sensitive to interest rate (or exchange rate) in Nigeria. This result was substantiated by the estimated BEKK-GARCH(1, 1) model. Furthermore, the effects of news (shocks spillover) are bi-directional across the markets. However, volatility spillover is unidirectional, from exchange rate to interest rate, suggesting that, calming the volatility in foreign exchange market does guarantee moderation of volatility in the money market, whereas the reverse is not the case. The results underscore the growing influence of foreign exchange market in the financial space of the Nigerian economy. Thus, the study recommends that foreign exchange policies aimed at maintaining exchange rate stability should be sustained, having found exchange rate to be more effective in moderating interest rate volatility in Nigeria.

Volatility Spillover Structure of Stock and Foreign Exchange Market between Korea, Japan, and Hong Kong

2006 ◽  
pp. 162-182
Author(s):  
Masayuki Susai
Keyword(s):  
Exchange Rate ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Rate Volatility ◽  
Foreign Exchange Rate ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Portfolio Risk ◽  
International Portfolio

Highly developed IT technology can be the source of volatility spillover between markets located in other countries. In this chapter, we investigate the interrelationship between stock returns in North East Asian countries and the effect of foreign exchange rate volatility on the interrelationship between stock returns. We bring out clear simultaneous interrelationship between stock return and foreign exchange volatility. Focusing on covariance of each asset returns, if we do not take foreign exchange rate volatility into account when we evaluate our international portfolio, the portfolio risk might be underevaluated. The analysis shows that foreign exchange market turbulence might be accompanied by increase in covariance between stock returns. Just after the Asian currency crisis, the relationship between stock returns and foreign exchange turbulence might have changed. For managing international portfolio risk, we should be aware of foreign exchange risk and structural change in covariance between stock returns.

The Floating Dollar in the Greenback Period: A Test of Theories of Exchange-Rate Determination

1981 ◽  
Vol 41 (3) ◽  
pp. 629-650 ◽  
Author(s):  
Lawrence H. Officer
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange ◽  
Purchasing Power Parity ◽  
Foreign Exchange Market ◽  
Purchasing Power ◽  
Exchange Market ◽  
Power Parity ◽  
Exchange Rate Determination ◽  
Income Effects

Some leading modern theories of exchange-rate determination are pitted against each other in explaining fundamental movements of the freely floating U.S. dollar in the foreign-exchange market during the greenback period, 1862–1878. A purchasing-power-parity theory augmented to incorporate interest-rate, and possibly income, effects provides the best explanation of the exchange rate. The standard works on the greenback period are subject to some amendments in light of the study.

The pattern of exchange rate co-movement in selected African countries

2016 ◽  
Vol 43 (6) ◽  
pp. 928-953 ◽  
Author(s):  
Emmanuel Carsamer
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange ◽  
Financial Market ◽  
Market Integration ◽  
Foreign Exchange Market ◽  
Dynamic Panel Data ◽  
Exchange Market ◽  
Content Type ◽  
Financial Market Integration

Purpose The concept of co-movement has witnessed a resurgence in the international finance literature in recent years after the black swan events. This might be due to a renewed focus on globalization and financial market integration in the world over. The purpose of this paper is to examine the dynamic linkages in the foreign exchange market resulting from recent globalization and financial market integration in Africa. Design/methodology/approach A conceptual framework was adapted from the extant literature and was used as the basis of modeling foreign exchange market in Africa. This paper adopts a quantitative research approach and opted for dynamic panel data analysis to empirically unearth the determinants of foreign exchange market co-movement. Findings It is interesting to note that exchange rate co-movements were externally determined. Robust support was found for trade intensity, competition and world interest rate on foreign exchange rates co-movement, but regional interest rate differential decreased it. These findings clearly demonstrate the level of financial development and challenges that sometimes exist in exchange rate policy implementation by policy makers in Africa. Research limitations/implications Future research might incorporate bilateral investment into the model of exchange rate correlation. Originality/value Studies focussing on simultaneous consideration of intensity, trade competition and capital account openness to exchange rate correlations in the contexts of Africa are almost non-existent, and this study makes an important contribution in not only addressing this imbalance but also more importantly improving the relatively parsimonious literature on foreign exchange co-movement.

scholarly journals BITCOIN-USD TRADING USING SVM TO DETECT THE CURRENT DAY’S TREND IN THE MARKET

2019 ◽  
Vol 1 (1) ◽  
pp. 70-77
Author(s):  
Ferdiansyah Ferdiansyah ◽  
Edi Surya Negara ◽  
Yeni Widyanti
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Investment Decisions ◽  
Market Value ◽  
Develop Model ◽  
Support Vector ◽  
Prediction Tool ◽  
Exchange Market ◽  
Support Vector Classifier

Cryptocurrency trade is now a popular type of investment. Cryptocurrency market has been treated similar to foreign exchange and stock market. The Characteristics of Bitcoin have made Bitcoin keep rising In the last few years. Bitcoin exchange rate to American Dollar (USD) is $3990 USD on November 2018, with daily pice fluctuations could reach 4.55%2. It is important to able to predict value to ensure profitable investment. However, because of its volatility, there’s a need for a prediction tool for investors to help them consider investment decisions for cryptocurrency trade. Nowadays, computing based tools are commonly used in stock and foreign exchange market predictions. There has been much research about SVM prediction on stocks and foreign exchange as case studies but none on cryptocurrency. Therefore, this research studied method to predict the market value of one of the most used cryptocurrency, Bitcoin. The preditct methods will be used on this research is regime prediction to develop model to predict the close value of Bitcoin and use Support vector classifier algorithm to predict the current day’s trend at the opening of the market

scholarly journals HEDGING CURRENCY RISKS IN INTERNATIONAL BUSINESS USING THE OPPORTUNITIES OF THE INTERNATIONAL FOREIGN EXCHANGE MARKET

2021 ◽  
Author(s):  
Olena Liegostaieva
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
International Business ◽  
Foreign Exchange Market ◽  
Foreign Currency ◽  
Exchange Market ◽  
Currency Risk ◽  
Exchange Rate Fluctuations ◽  
Current Value ◽  
Financial Result

The article is devoted to the study of currency risk hedging in international business. The article notes that the international foreign exchange market is the largest and fastest growing of all world markets. The characteristic features of the international currency market are substantiated and offered. It is also noted that foreign exchange transactions provide economic ties between participants located on different sides of state borders: settlements between firms from different countries for the supply of goods and services, foreign investment, international tourism and business travel. It is determined that hedging of currency risks is the protection of funds from the unfavorable movement of exchange rates, and is carried out in fixing the current value of funds by concluding an agreement on the foreign exchange market. When hedging, the risk of exchange rate changes disappears, and this makes it possible to forecast the company's activities and see the financial result, which is not distorted by exchange rate fluctuations, which will allow you to determine product prices, calculate profits, etc. The main difference between hedging and other types of transactions is that its purpose is not to generate additional profits, but to reduce the risk of potential losses, as risk reduction is almost always necessary to pay, hedging, of course, involves additional costs. Hedging is a way to improve business planning. An enterprise wishing to use this service shall pledge the specified amount, from which losses on its positions will be deducted. In today's conditions, thanks to the foreign exchange market, there is a very reliable way to hedge currency risk. This method is to fix the current value of funds by concluding agreements in this market. With hedging, the company eliminates the risk of exchange rate fluctuations, and this allows you to forecast activities and see the financial result, which is not changed by exchange rate fluctuations. Allows you to pre-determine product prices, determine profits, etc. Thus, the principle of hedging in international business is to open a currency position in a foreign currency account for future transactions to convert funds.

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