IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Volatility behavior of exchange rate future contracts

Author Info

Listed author(s):
  • Maria Aguirre
  • Reza Saidi
Registered author(s):

    Abstract

    The increasing globalization of economies and the concurrent increase in the risk of currency exposure has stimulated the development of new instruments to allow both investors and traders to hedge their currency risk. The expansion of these derivatives, however, has raised some concerns. This paper studies the determinants of the dynamics of exchange rate future contracts as a means to identify the sources of such concerns. By using a mean-exponential generalized autoregressive conditional heteroskedasticity (M-EGARCH) model for five different future contract lengths and six developed economies, it is found that an M-EGARCH(1,1) effectively describes the exchange rate futures' daily dynamic. Sign, size, and persistence effects on the volatility of future contracts are all significant, thus providing important information to both policy makers and market participants. Copyright International Atlantic Economic Society 2000

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://hdl.handle.net/10.1007/BF02298393
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Springer & International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 28 (2000)
    Issue (Month): 4 (December)
    Pages: 396-411

    as
    in new window

    Handle: RePEc:kap:atlecj:v:28:y:2000:i:4:p:396-411
    DOI: 10.1007/BF02298393
    Contact details of provider: Web page: http://www.springer.com

    Postal:

    Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303

    Phone: (404) 965-1555
    Fax: (404) 965-1556
    Web page: http://www.iaes.org/
    Email:


    More information through EDIRC

    Order Information: Web: http://www.springer.com/economics/journal/11293/PS2

    Keywords:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    2. Chappell, David & Padmore, Joanne & Ellis, Catherine, 1996. "A Note on the Distribution of BDS Statistics for a Real Exchange Rate Series," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 561-565, August.
    3. Peter M. Garber & Michael G. Spencer, 1995. "Foreign Exchange Hedging and the Interest Rate Defense," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 490-516, September.
    4. Flood, Robert P. & Garber, Peter M. & Kramer, Charles, 1996. "Collapsing exchange rate regimes: Another linear example," Journal of International Economics, Elsevier, vol. 41(3-4), pages 223-234, November.
    5. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
    6. Ronald Macdonald & Mark P. Taylor, 1992. "Exchange Rate Economics: A Survey," IMF Staff Papers, Palgrave Macmillan, vol. 39(1), pages 1-57, March.
    7. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
    8. Kroner, Kenneth F. & Sultan, Jahangir, 1993. "Time-Varying Distributions and Dynamic Hedging with Foreign Currency Futures," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 28(04), pages 535-551, December.
    9. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
    10. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
    11. Cavanaugh, Kenneth L., 1987. "Price dynamics in foreign currency futures markets," Journal of International Money and Finance, Elsevier, vol. 6(3), pages 295-314, September.
    12. Baillie, Richard T. & P. Osterberg, William, 1997. "Central bank intervention and risk in the forward market," Journal of International Economics, Elsevier, vol. 43(3-4), pages 483-497, November.
    13. Boothe, Paul & Glassman, Debra, 1987. "The statistical distribution of exchange rates: Empirical evidence and economic implications," Journal of International Economics, Elsevier, vol. 22(3-4), pages 297-319, May.
    14. Glassman, Debra A. & Riddick, Leigh A., 1996. "Why empirical international portfolio models fail: evidence that model misspecification creates home asset bias," Journal of International Money and Finance, Elsevier, vol. 15(2), pages 275-312, April.
    Full references (including those not matched with items on IDEAS)

    The CitEc project has not yet found citations to this item.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Access and download statistics

    When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:28:y:2000:i:4:p:396-411. See general 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: (Sonal Shukla)

    or (Rebekah McClure)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.