Cross-Correlations of the Forex Market Using Power Law Classification Scheme Picture

Abstract

The analysis of crisis influence on the cross-correlation of the foreign exchange market (forex) daily exchange rates time series is presented. The analysis was conducted on 42 exchange rates with PLN as the common base currency. The time series cover the period from 09.10.2007 till 08.08.2015. Cross-correlation of the time series was analysed by power law classification scheme. It was shown that the strength of correlation allows not only to properly distinguish crisis and prosperity periods but also, followed by network analysis, is capable of recognizing the nodes which are the source of the crisis.

Network Analysis of Cross-Correlations on Forex Market during Crises. Globalisation on Forex Market

“…Of course, this result is in agreement with the linear relationship between the considered functions. Other examples and more detailed analysis can be found in [ 28 , 29 , 30 ].…”

“…In fact, this term is gathering a great variety of methods. Just mentioning the most often used: classical variance analysis and Pearson correlation coefficient [ 10 , 11 , 12 , 13 , 14 , 15 ], cointegration analysis [ 16 , 17 , 18 , 19 ], multifractal analysis [ 20 , 21 , 22 , 23 ], random matrix theory [ 24 , 25 , 26 , 27 ], power law classification scheme [ 28 , 29 , 30 ], or entropy-based methods [ 31 , 32 ].…”