Regime switches in exchange rate volatility and uncovered interest parity

Ichiue, Hibiki; Koyama, Kentaro

doi:10.1016/j.jimonfin.2011.07.003

Cited by 57 publications

(39 citation statements)

References 20 publications

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“…In the medium run (i.e. for contracts ranging from one month to one year), however, we note that carry trade is significantly correlated to FPNRs, which is consistent with the evidence and analysis presented here and elsewhere (Ichiue and Koyama (2011)). We also notice that the sign accompanying the carry trade coefficient is reversed for longer durations, confirming that speculative activity is concentrated in medium-duration contracts.…”

Section: Where Is Carry Trade Activity More Concentratedsupporting

confidence: 92%

The Chilean peso exchange-rate carry trade and turbulence

Cox¹,

Carreño²

2017

CEPAL Review

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In this study we provide evidence regarding the relationship between the Chilean peso carry trade and currency crashes of the peso against other currencies. Using a rich dataset containing information from the local Chilean forward market, we show that speculation aimed at taking advantage of the recently large interest rate differentials between the peso and developedcountry currencies has led to several episodes of abnormal turbulence, as measured by the exchange-rate distribution's skewness coefficient. In line with the interpretative framework linking turbulence to changes in the forward positions of speculators, we find that turbulence is higher in periods during which measures of global uncertainty have been particularly high.

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Section: Where Is Carry Trade Activity More Concentratedsupporting

confidence: 92%

The Chilean peso exchange-rate carry trade and turbulence

Cox¹,

Carreño²

2017

CEPAL Review

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“…Note: An appreciation of the high yield currency is an example of the forward premium puzzle and the violation of the uncovered interest parity (UIP). The UIP regression coefficient has been estimated as low as -2.79 for the yen (Ichiue and Koyama , 2008). …”

Section: Resultsmentioning

confidence: 98%

Impact of macro-economic surprises on carry trade activity

Hutchison

Sushko

2013

Journal of Banking & Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper investigates market perceptions of the risk of large exchange rate movements by using information gleaned from risk reversal contracts and macroeconomic news surprises. We focus on the height of the carry trade period in Japan (March 2004 through December 2006). Concerns about sharp yen appreciation were particularly evident during the period of heavy carry trade activity and are more likely to show up in the price of risk. We focus on "big" news surprises that are more likely to convey information about the risk of large changes in the exchange rate, consider a broad set of news, and investigate the direct impact of news on the value of dollar yen risk reversals. We also consider the effect of the value of risk reversals on the yen carry trade, using (non-commercial) open interest positions in futures markets as a proxy for carry trade activity. Overall, we find that macroeconomic news is an important determinant of risk reversals during periods of heavy carry trade volume, particularly when the cost of hedging against large yen appreciation is increasing. Moreover, there is a close link between risk reversals and non-commercial futures positions. We calculate a substantial effect of macroeconomic news on carry trade activity, with risk reversals (the cost of hedging) as the transmission mechanism. Terms of use: Documents inJEL classification: C22, F31, G14

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“…Como se muestra en el cuadro 5, para las operaciones a corto plazo (<1 mes), la relación entre la operación de acarreo y las posiciones a plazo de no residentes (la variable dependiente) no es estadísticamente significativa. A mediano plazo (para contratos que van de un mes a un año), no obstante, observamos que la operación de acarreo tiene una importante correlación con las posiciones a plazo de no residentes, lo que se ajusta a los datos y análisis presentados en esta y otras publicaciones (Ichiue y Koyama, 2011). También observamos que el signo que acompaña al coeficiente de la operación de acarreo se revierte para duraciones más largas, lo que confirma que la actividad especulativa se concentra en los contratos de duración media.…”

Section: ¿La Actividad De Las Operaciones Deunclassified

Operaciones de acarreo de divisas (carry trade) y sus efectos sobre la turbulencia cambiaria en Chile

Cox¹,

Carreño²

2017

Revista De La CEPAL

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ResumenEn este estudio se ofrecen datos sobre la relación entre la operación de acarreo (carry trade) en pesos chilenos y las caídas de esta moneda frente a otras. Mediante el uso de un amplio conjunto de datos que contiene información del mercado cambiario a plazo local, mostramos que la especulación orientada a aprovechar los grandes diferenciales de la tasa de interés registrados en los últimos tiempos entre el peso y las monedas de los países desarrollados ha provocado varios episodios de turbulencia anormal, medidos por el coeficiente de asimetría de la distribución del tipo de cambio. De conformidad con el marco interpretativo que vincula a la turbulencia con los cambios en las posiciones a plazo de los especuladores, encontramos que la turbulencia es mayor en los períodos en que las mediciones de la incertidumbre mundial han sido especialmente altas. Palabras claveMonedas, Chile, tipos de cambio, inestabilidad monetaria, mercado de divisas, especulación. Clasificación JELE31, F41, G15, E24

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Regime switches in exchange rate volatility and uncovered interest parity

Cited by 57 publications

References 20 publications

The Chilean peso exchange-rate carry trade and turbulence

The Chilean peso exchange-rate carry trade and turbulence

Impact of macro-economic surprises on carry trade activity

Operaciones de acarreo de divisas (carry trade) y sus efectos sobre la turbulencia cambiaria en Chile

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