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Currency Risk: Comovements and Intraday Cojumps

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  • Jérôme Lahaye

Abstract

This paper identifies sources of risk in currency returns. We investigate intraday jump intensity in 6 foreign exchange markets (EUR/USD, USD/JPY, USD/CHF, GBP/USD, AUD/USD and USD/CAD) as well as bivariate cojumps in the related 15 market pairs. We use the Lee-Mykland test for jumps and a simple bootstrap approach to identify bivariate cojumps with intraday returns and realized measures. Cojump patterns such as cojump sign, or occurrence timing, are to some extent consistent with U.S. news causing cojumps. Whereas jump intensity is rather similar throughout markets, we find substantial heterogeneity in the way market pairs are connected through cojumps.

Suggested Citation

  • Jérôme Lahaye, 2016. "Currency Risk: Comovements and Intraday Cojumps," Annals of Economics and Statistics, GENES, issue 123-124, pages 53-76.
    • Handle: RePEc:adr:anecst:y:2016:i:123-124:p:53-76
    DOI: 10.15609/annaeconstat2009.123-124.0053
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    More about this item

    Keywords

    Cojump; Jump; Bootstrap; Diffusion; Brownian; Semimartingale; High-Frequency; Risk; Diversification; Foreign Exchange; Correlation; Crisis; Tail;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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