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Currency futures and currency crises

Röthig, Andreas :
Currency futures and currency crises.
In: Darmstadt Discussion Papers in Economics, 136. Darmstadt
[Report], (2004)

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Item Type: Report
Title: Currency futures and currency crises
Language: English
Abstract:

Since financial derivatives are key instruments for risk taking as well as risk reduction, it is only straightforward to examine their role in currency crises. This paper addresses this issue by investigating the impact of currency futures trading on the underlying exchange rates. After a discussion of trading mechanisms and trader types, the linkage between futures trading activity and spot market turbulence is modelled using a VAR-GARCH approach for the exchange rates of Australia, Canada, Japan, Korea and Switzerland in terms of the US dollar. The empirical results indicate that there is a positive relationship between currency futures trading activity and spot volatility. Moreover, in the case of four out of the total of five currencies discussed in this paper, futures trading activity adds significantly to spot volatility.

Series Name: Darmstadt Discussion Papers in Economics
Volume: 136
Place of Publication: Darmstadt
Collation: 38 S.
Uncontrolled Keywords: Currency crises; Exchange rate volatility; Currency futures trading activity; VAR-GARCH estimation
Classification DDC: 300 Sozialwissenschaften > 330 Wirtschaft
Divisions: 01 Law and Economics
01 Law and Economics > Volkswirtschaftliche Fachgebiete > Fachgebiet Makroökonomie und Finanzmärkte
01 Law and Economics > Volkswirtschaftliche Fachgebiete
Date Deposited: 19 Nov 2008 15:59
Last Modified: 29 Jan 2016 14:20
Related URLs:
URN: urn:nbn:de:tuda-tuprints-47936
Additional Information:

JEL Classification: C13, C32, F31, G15

Additional Information:

JEL Classification: C13, C32, F31, G15

URI: http://tuprints.ulb.tu-darmstadt.de/id/eprint/4793
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