CLS Bank

2011 ◽  
pp. 190-212
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Payment System ◽  
Private Bank ◽  
The Us ◽  
Time Zones ◽  
Management Schemes ◽  
The Impact ◽  
Market Infrastructure ◽  
Fx Market

This chapter focuses on the CLS Bank. CLS Bank International (hereinafter referred to as “CLS Bank”) was established in 1999 to eliminate settlement risk associated with settling foreign exchange (FX) transactions in different time zones. It provides the unique multi-currency Payment versus Payment (“PVP”) settlement service for the major players in the FX market. Although CLS Bank was established as a private bank in the US, the main purpose of the Bank is neither to accept deposits nor to make loans. Its function is dedicated to providing a multi-currency settlement service. Thus it is more appropriate to regard CLS Bank as a kind of payment system, or market infrastructure than just a private bank. This chapter elaborates on the mechanism of CLS Bank, which includes the organization, the shareholders, the eligible currencies, and the accounts used for CLS settlement. The funding and settlement procedures and risk management schemes of CLS Bank are discussed in greater detail. In addition, the impact of CLS Bank to FX settlements and the FX market is also analyzed.

Stock returns and the US dollar: the importance of monetary policy

2015 ◽  
Vol 41 (10) ◽  
pp. 1046-1058 ◽  
Author(s):  
J. Christopher Hughen ◽  
Scott Beyer
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Stock Returns ◽  
Foreign Exchange ◽  
Stock Prices ◽  
Factor Model ◽  
Consumer Spending ◽  
Content Type ◽  
The Us ◽  
The Impact

Purpose – In the increasingly globalized economy, foreign exchange fluctuations have multiple, conflicting effects on domestic stock prices. The purpose of this paper is to examine return data to determine the relation between the dollar’s value and stock prices as it relates to monetary policy. Design/methodology/approach – The authors examine US stock returns over a 40-year period, which is classified according to monetary policy and dollar trend. To better understand the impact of foreign exchange fluctuations, the authors estimate a model of stock returns using the three Fama-French factors and a momentum factor. Then the authors explore the underlying economic fundamentals that drive the sharp difference in annual returns between periods when the dollar is in an uptrend trend with loose monetary policy and periods when the dollar is in a downtrend with tight monetary policy. Findings – Over the last 40 years, US stock returns were 2.5 times higher when the dollar was trending up vs down. The factor model of returns shows that equity returns are positively associated with periods when the dollar appreciated. Returns were particularly high when the dollar was in an uptrend during accommodative monetary policy. During these periods, stocks in the consumer goods and services industries provided relatively high returns. This occurred with strong economic growth due to consumer spending. Stocks exhibited the lowest returns when the dollar was depreciating and the Federal Reserve was tightening. Originality/value – The key contribution of the research is that currency trends should be analyzed in the light of monetary policy. During periods of accommodative monetary policy and dollar appreciation, the US stock market provided average returns of 18.7 percent compared to −3.29 percent during a period of restrictive monetary policy and dollar depreciation. This result is driven by stronger economic growth, which is composed of consumer spending that more than offsets the dollar’s impact on net exports.

scholarly journals Teaching The Bid-Ask Spread And Triangular Arbitrage For The Foreign Exchange Market

2018 ◽  
Vol 11 (4) ◽  
pp. 55-62
Author(s):  
Jeng-Hong Chen
Keyword(s):  
International Finance ◽  
Event Study ◽  
Foreign Exchange ◽  
Market Microstructure ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
Bid Ask Spread ◽  
Arbitrage Opportunities ◽  
The Impact ◽  
Fx Market

The foreign exchange (FX) market is an important chapter in international finance. Understanding the market microstructure is critical for learning the FX market.  To assist students better understand the FX market microstructure, an instructor can use an event study with minute-by-minute quote data provided in the Excel assignment, asking students to investigate the impact of an event on the bid-ask spread and triangular arbitrage opportunities.  This pedagogical paper provides two examples of making the Excel assignment for reference.

scholarly journals THE IMPACT OF THE RENMINBI INTERNATIONALIZATION ON THE GLOBAL MONETARY ORDER

2019 ◽  
Vol 1 (2) ◽  
pp. 13-30
Author(s):  
Katarzyna Twarowska
Keyword(s):  
Foreign Exchange ◽  
International Monetary System ◽  
International Currency ◽  
Monetary System ◽  
International Money ◽  
The Us ◽  
Us Dollar ◽  
The Stability ◽  
The Impact ◽  
Research Analysis

Background and the purpose: The Chinese economy is the fastest growing and changing economy in the modern world. The importance of the renminbi as an international currency is not relevant to China's economic potential and role in the global economy, however, many scientific studies indicate that the position of that currency in the functions of international money will become stronger in the future. This encouraged the author to assess the consequences of the renminbi internationalisation, in particular the impact on the stability of the international monetary system. An additional aim of the paper is to present the possible scenarios for reform of the international monetary system and assess whether the Chinese currency has a chance to become a global currency. Methods: The assessment of the renminbi’s role in global foreign exchange relations was carried out by analysing the use of Chinese currency in the main functions of international money in official sector (reserve currency, intervention currency, anchor currency) and private sector (investment currency, vehicle currency in international trade and on the foreign exchange market, invoicing and quotation currency) using the Cohen matrix. The author also assessed the benefits for the stability of the international monetary system, resulting from the transition from a system based on the dominance of the US dollar to a multi-currency system, including the renminbi. The study included theoretical research (analysis of the literature and research reports) and empirical research (analysis of statistical data). Results and conclusions: The author confirmed the research hypothesis: An increase in the use of renminbi in the functions of international currency will increase the stability of the international monetary system by reducing the dependence of this system on the single currency, which is the US dollar.

scholarly journals An investigation of foreign exchange risk management by exporting small and medium sized enterprises

2021 ◽  
Author(s):  
◽  
Vu Dang
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Multinational Enterprises ◽  
Research Approach ◽  
Foreign Exchange Risk ◽  
Export Ratio ◽  
Theoretical Perspectives ◽  
Exchange Risk ◽  
New Research ◽  
The Impact

<p>Previous studies on foreign exchange (forex) risk management have tended to focus on multinational enterprises; while how SMEs manage their forex risk is still largely unexplored. As small and medium sized enterprises (SMEs) are increasingly involved in international markets, they have become a new research setting on forex risk management. Given that SMEs have limited access to resources, skills and capabilities, internal hedging techniques could be favoured by SMEs. There is limited research on this matter, and the extant literature on forex management generally considers derivatives as major hedging techniques for large firms. This thesis primarily investigates how exporting SMEs manage forex risk. In addition, approaches to forex management could be changed as a firm becomes more experienced internationally. Following the basic principles of internationalisation theory, the thesis also examines the impact of the internationalisation degree of the firm on forex management decisions.   This thesis sheds new light on SMEs’ hedging practices by providing a better understanding of SMEs’ choices of forex risk management. Three research questions have been raised: (1) what determinants influence SMEs’ choice to hedge as a way of managing forex risk; (2) what strategies do SMEs use when they choose hedging to manage forex exposure; and (3) how does the degree of internationalisation impact the choice of forex management.  The thesis draws on two theoretical perspectives to help address these overarching questions. It extends the use of the resource-based view (RBV), and combines this with internationalisation theory. The setting of SMEs is a context for using the RBV. New Zealand and Australian exporting SMEs provide the sample for testing the hypotheses.   The contributions of this thesis are twofold. Firstly, the thesis identifies four determinants of forex risk strategy by exporting SMEs, i.e. degree of internationalisation (specifically, export ratio), forex exposure, perceived forex risk, and resources. Secondly, it extends the use of the RBV and the internationalisation theory in forex risk management of SMEs. In addition, the thesis uses a research approach combining an exploratory qualitative study and a main quantitative study.</p>

scholarly journals INDIAN IT FIRMS CREATING MANAGEMENT CODES FOR FOREIGN EXCHANGE RISK

2021 ◽  
Vol 5 (2) ◽  
pp. 115-129
Author(s):  
Nitin Shankar ◽  
Fatima Beena
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
High Growth ◽  
Jel Classification ◽  
Annual Reports ◽  
Foreign Exchange Risk ◽  
Exchange Risk ◽  
Management Techniques ◽  
The Impact ◽  
Exchange Risk Management

Purpose: India has been a preferred I.T. service sourcing nation globally and has been registering high growth. India has a significant pie of the global sourcing market, accounting for nearly 55 % share. It covers significant global through its more than one thousand centres spread across continents. With a year-on-year growth of 6.1%, India’s I.T. and ITES industry will increase to the U.S. $ 350 million by 2025. The extensive expanse of geographical coverage also translates into foreign exchange risk; hence foreign exchange risk management becomes an important strategy. The current study attempts to assess the impact of foreign exchange risk management on the Indian sector over 2007-2017; the period includes the 2008 financial crisis taken up in the current study. Design/Methodology/ Approach: We analyzed the Indian I.T. companies listed on the BSE Ltd on their exposure, approach, and management towards foreign exchange risk. We investigated their annual reports from 2007 -2017 to understand their exposure and the adopted external foreign exchange risk management techniques. We further assessed the impact of these foreign exchange risk management techniques on the firm’s value. Findings: The impact of foreign exchange risk management was significant on small-cap I.T. companies for the study period. Though for the during the 2008 crisis term, it was found to be insignificant. Practical/Implications: Foreign exchange risk management is crucial for Indian I.T. companies indulging in cross-border trade. The current study incorporates external methods of managing foreign exchange risk management; hence even if the impact were found to be insignificant for Mid Cap and some Large-cap companies, they would be practicing internal hedging methods, which puts a strong case tapping trillion-dollar business through a fully functional competitive International Financial Centre. Originality/Value: Our paper contributes to the literature on Foreign exchange risk management by Indian I.T. companies, which contributes handsomely to India’s GDP and Foreign exchange reserve. JEL Classification Codes: F31, G32.

scholarly journals An investigation of foreign exchange risk management by exporting small and medium sized enterprises

2021 ◽  
Author(s):  
◽  
Vu Dang
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Multinational Enterprises ◽  
Research Approach ◽  
Foreign Exchange Risk ◽  
Export Ratio ◽  
Theoretical Perspectives ◽  
Exchange Risk ◽  
New Research ◽  
The Impact

<p>Previous studies on foreign exchange (forex) risk management have tended to focus on multinational enterprises; while how SMEs manage their forex risk is still largely unexplored. As small and medium sized enterprises (SMEs) are increasingly involved in international markets, they have become a new research setting on forex risk management. Given that SMEs have limited access to resources, skills and capabilities, internal hedging techniques could be favoured by SMEs. There is limited research on this matter, and the extant literature on forex management generally considers derivatives as major hedging techniques for large firms. This thesis primarily investigates how exporting SMEs manage forex risk. In addition, approaches to forex management could be changed as a firm becomes more experienced internationally. Following the basic principles of internationalisation theory, the thesis also examines the impact of the internationalisation degree of the firm on forex management decisions.   This thesis sheds new light on SMEs’ hedging practices by providing a better understanding of SMEs’ choices of forex risk management. Three research questions have been raised: (1) what determinants influence SMEs’ choice to hedge as a way of managing forex risk; (2) what strategies do SMEs use when they choose hedging to manage forex exposure; and (3) how does the degree of internationalisation impact the choice of forex management.  The thesis draws on two theoretical perspectives to help address these overarching questions. It extends the use of the resource-based view (RBV), and combines this with internationalisation theory. The setting of SMEs is a context for using the RBV. New Zealand and Australian exporting SMEs provide the sample for testing the hypotheses.   The contributions of this thesis are twofold. Firstly, the thesis identifies four determinants of forex risk strategy by exporting SMEs, i.e. degree of internationalisation (specifically, export ratio), forex exposure, perceived forex risk, and resources. Secondly, it extends the use of the RBV and the internationalisation theory in forex risk management of SMEs. In addition, the thesis uses a research approach combining an exploratory qualitative study and a main quantitative study.</p>

scholarly journals A Study on the Risk Management Strategy for Military Installations Project of Yongsan Relocation Plan Using Structural Equation Model

2018 ◽  
Author(s):  
Hobin Yoon ◽  
Chansik Lee
Keyword(s):  
Risk Factors ◽  
Risk Management ◽  
Structural Equation Model ◽  
Structural Equation ◽  
Management Strategy ◽  
Equation Model ◽  
Risk Management Strategy ◽  
Us Army ◽  
The Us ◽  
The Impact

Some of the recent large-scale national projects in South Korea are delayed or suspended due to belated responses to risk occurring on site. Currently, the Far East District (FED) project is being implemented to relocate the US Army bases from Yongsan to Pyeongtaek. Because of lack of experience and understanding about the characteristics of such a project, the deadline of taking over to the US Army Korea has been missed. This study identifies problems of each participant in the Yongsan Relocation Plan (YRP) of the US Army Korea with respect to construction project management and establishes a risk management strategy reflecting characteristics of FED project. To derive significant risk factors influencing YRP, various field data like weekly and monthly reports and other reports on construction condition are analyzed, and experts&rsquo; advices are collected and a survey is conducted. Mediators and latent variables are ultimately obtained. Furthermore, a structural equation model is used to both analyze and evaluate complex causal relations among many variables of YRP. The impact of risk factors on the schedule, quality and cost of the project is analyzed. In particular, the case of Site A is examined to see how the project is affected by those risk factors.

scholarly journals Impact of Foreign Exchange Administration Rule on the Nexus between Country-Specific FDI and Malaysian Currency

2021 ◽  
Vol 15 (4) ◽  
pp. 135-152
Author(s):  
Wee-Yeap Lau ◽  
Tien-Ming Yip
Keyword(s):  
Foreign Exchange ◽  
Foreign Currency ◽  
Long Run ◽  
Downward Pressure ◽  
The Us ◽  
Exchange Rule ◽  
Japanese Fdi ◽  
The Impact ◽  
The Relationship ◽  
Country Specific

In the aftermath of the US Presidential election on 8 November 2016, the Malaysian currency Ringgit (MYR) had witnessed unprecedented volatility in its value relative to the USD. As a policy response, Bank Negara Malaysia (BNM) implemented a Supplemental Foreign Exchange Administration (SFEA) Rule in December 2016. Exporters are required to convert 75 per cent of foreign currency proceeds from the exports of goods into MYR with a licensed onshore bank. This study evaluates the impact of the new SFEA Rule on the relationship between country-specific FDI and MYR. Based on the data of five major inward FDI countries from 2015 to 2018, our results show: Firstly, Japanese FDI strengthens MYR in post-SFEA Rule; Secondly, FDI from Singapore is found to exert downward pressure on MYR; Thirdly, FDI from China, the Netherlands and the US are insignificant in influencing the MYR; Finally, inward FDI from different countries responds differently to the Rule. Notably, the results obtained are robust to different measures of the exchange rate. On policy suggestion, the Foreign Exchange Rule should also target non-export oriented inward FDIs to achieve the policy target. The result also highlights the importance of export-oriented FDIs for the long-run benefit of the Malaysian economy.

The Impact of Shariah Governance and Corporate Governance on the Risk Management Practices: Evidence from Local and Foreign Islamic Banks in Malaysia

2018 ◽  
Vol 15 (2) ◽  
pp. 1-20
Author(s):  
Sabri Embi ◽  
Zurina Shafii
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Management Practices ◽  
Principal Component ◽  
T Test ◽  
The Body ◽  
Primary Data ◽  
Islamic Banks ◽  
Shariah Governance ◽  
The Impact

The purpose of this study is to examine the impact of Shariah governance and corporate governance (CG) on the risk management practices (RMPs) of local Islamic banks and foreign Islamic banks operating in Malaysia. The Shariah governance comprises the Shariah review (SR) and Shariah audit (SA) variables. The study also evaluates the level of RMPs, CG, SR, and SA between these two type of banks. With the aid of SPSS version 20, the items for RMPs, CG, SR, and SA were subjected to principal component analysis (PCA). From the PCA, one component or factor was extracted each for the CG, SR, and RMPs while another two factors were extracted for the SA. Primary data was collected using a self-administered survey questionnaire. The questionnaire covers four aspects ; CG, SR, SA, and RMPs. The data received from the 300 usable questionnaires were subjected to correlation and regression analyses as well as an independent t-test. The result of correlation analysis shows that all the four variables have large positive correlations with each other indicating a strong and significant relationship between them. From the regression analysis undertaken, CG, SR, and SA together explained 52.3 percent of the RMPs and CG emerged as the most influential variable that impacts the RMPs. The independent t-test carried out shows that there were significant differences in the CG and SA between the local and foreign Islamic banks. However, there were no significant differences between the two types of the bank in relation to SR and RMPs. The study has contributed to the body of knowledge and is beneficial to academicians, industry players, regulators, and other stakeholders.

Sign in / Sign up

Export Citation Format

Share Document