The analysis of volatility transmission mechanism among carry trade currencies
AbstractInvestors take the advantage of disequilibrium in spot and forward exchange markets by investing in higher yield currency on a covered basis. An alternative of covered interest arbitrage is uncovered interest arbitrage (UIA) in which investors choose to remain uncovered accepting the currency risk. The “yen carry trade” is known as a Longstanding application of UIA. Owing to Japanese low interest rates, yen carry trade has been a highly profitable strategy which involves borrowing in yen to buy higher yielding assets. Employing multivariate GARCH modeling, we examine the volatility transmission mechanism between the exchange rates involved in “yen carry trade”. Due to high impact of Lehman Brothers’ collapse on world financial markets, we rather do the analysis for both before and after the default. Results reveal that interactions between the exchange rates increase considerably in response to negative market shocks. Our findings present new cross-hedging opportunities for investors.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoArticle provided by Bilgesel Yayincilik in its journal İktisat İşletme ve Finans.
Volume (Year): 29 (2014)
Issue (Month): 335 ()
Contact details of provider:
Web page: http://iif.com.tr
Yen Carry Trade; Volatility Spillover; Multivariate GARCH; Asymmetric Shock.;
Find related papers by JEL classification:
- G19 - Financial Economics - - General Financial Markets - - - Other
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ali Bilge).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.