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作者 Mutafoglu, Takvor H
書名 Essays on the impact of carry trade activity on exchange rate movements & market volatility
國際標準書號 9781124290539
book jacket
說明 111 p
附註 Source: Dissertation Abstracts International, Volume: 71-12, Section: A, page:
Adviser: Merih Uctum
Thesis (Ph.D.)--City University of New York, 2010
Average daily turnover in FX markets were raised to $1.9 trillion in April 2004, a rise of 54% at current exchange rates and 36% at constant exchange rates. One of the reasons for such a strong growth in turnover is carry trading where investors borrow money in a currency with low interest rates in order to invest in a currency with higher interest rates
The first part of this thesis re-examines the relationship between the yen carry trade activity and the related financial variables. Although a recent study, employing structural vector autoregression methodology, finds that the U.S. stock market performance has a dominant impact in the activity of the speculative yen carry trade using monthly data, I illustrate that this finding is not robust when weekly data is introduced to the same methodology. Instead, I find that it is the fluctuations in the Japanese yen against the U.S. dollar exchange rate, rather than the interest rate spread between the two countries and the U.S. stock market performance, that determines the direction of the yen carry trade
The second part of the thesis investigates the role of carry trade transactions on exchange rate behavior since these transactions change the supply and demand for currencies initiated by the opportunity to exploit interest rate differentials. The net position of speculators in different currency futures are used as an indicator for carry trade activity. By employing vector autoregression methodology, the results indicate that exchange rates react instantaneously to shocks in speculators' positions and Granger causality tests suggest that these positions lead to price discovery in the spot market for exchange rates. Furthermore, out-of-sample forecasts perform better than the random walk model for three of the five currencies in our sample based on root mean square and mean absolute error forecasting evaluation criteria
The last part investigates the dynamic lagged relationship between trading activity in currency futures and exchange rate volatility in the spot market using the net positions of trader in various currency futures markets. I use weekly high-low estimate of volatility, historical volatility, and conditional volatility from the GARCH (1, 1) process. The results point that in most cases while speculators and small traders in currency futures increase volatility in the corresponding spot markets, hedgers seem to decrease it as indicated by generalized impulse response functions. Also, in most of the cases, speculators' demand for futures increase in response to increased volatility in the spot market meanwhile hedgers' demand decrease
School code: 0046
Host Item Dissertation Abstracts International 71-12A
主題 Economics, Finance
0508
Alt Author City University of New York. Economics
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