The crisis in the foreign exchange market

Melvin, Michael; Taylor, Mark P.

doi:10.1016/j.jimonfin.2009.08.006

Cited by 226 publications

(153 citation statements)

References 5 publications

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“…The most widely used approach is to benchmark the current level of stress against its historical trend level (see, e.g., Illing and Liu, 2006;Melvin and Taylor, 2009;Caldarelli et al, 2011).…”

Section: Monitoring Financial Stress Transmissionmentioning

confidence: 99%

Does linkage fuel the fire? The transmission of financial stress across the markets

Chau

Deesomsak

2014

International Review of Financial Analysis

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The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractThis paper develops an indicator of financial stress transmission, called Financial Stress Spillover Index (FSSI), to monitor the condition of financial system and to identify periods of excessive spillover that may lead to financial instability. Specifically, using the "spillover index" approach of Diebold and Yilmaz (2012), we modify and extend the financial stress indices proposed by Oet et al. (2011) to track both total and directional stress spillovers across the U.S. equity, debt, banking, and foreign exchange markets. Unlike other previous studies, the important linkages among these four major financial sectors in an interconnected world are directly taken into account by considering the average and time-varying connectedness of each individual market. The evidence suggests that there are important stress episodes and fluctuations across markets; the total cross-market stress spillovers were rather limited until the onsets of financial crises. As the crises intensified, so too did the financial stress spillovers; with significant stress carrying over from debt and equity markets to the others. In addition, our results indicate that FSSI has a significant predictive power for the economic activity and provides useful information for dating financial crisis. JEL classification: G01; C03

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Section: Monitoring Financial Stress Transmissionmentioning

confidence: 99%

Does linkage fuel the fire? The transmission of financial stress across the markets

Chau

Deesomsak

2014

International Review of Financial Analysis

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“…Kolasa, Rubaszek and Taglioni (2010) have indicated that most countries have experienced adverse effects of world trade contraction, even firms in countries that have avoided the worst of the financial crisis. According to Melvin and Taylor (2009), exchange rates have experienced a record level of unpredictability. Corporate non-financial managers of domestic UAE firms who ignore the risks associated with foreign exchange when sales and purchases are made solely in their local market may expose their business and their shareholders to substantial risks.…”

Section: Study Motivationmentioning

confidence: 99%

Theoretical Framework of Foreign Exchange Exposure, Competition and the Market Value of Domestic Corporations

Alssayah¹,

Krishnamurti²

2013

IJEF

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The purpose of this study is to examine the foreign exchange rate exposure of domestic corporations in the United Arab Emirates (UAE) and the implications of that exposure for the market value of those corporations, considering the effect of competition as a determinant of exchange rate exposure. The justification for this study is that the UAE has an open economy with a high per capita income and a sizable annual trade surplus. In addition, the World Economic Forum issued its Global Competitiveness report for the year 2010-2011 in which the UAE was the only Arab country that was included in the elite club of countries that have shown an increment in endorsing new and improved methods for developing their economies. However, because of the indirect nature of foreign exchange rate exposure for local or domestic firms, the managers of these firms are unwilling to engage in hedging activities that may mitigate exchange rate exposure. A change in prices, the cost of final goods, the cost of raw material, labor costs or the costs of input or output and other substitute goods due to fluctuating exchange rates may have an adverse effect on the competitive position of a local or domestic firm with no international and foreign activities. The outcomes of this study will determine whether the domestic firms are exposure to the fluctuation of foreign exchange rates.Keywords: exchange rate exposure, foreign exchange risk, determinants of exchange rate exposure

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“…Like repurchases (repos) in the fixed income markets, FX swaps were utilized initially for bank's night position management [2]. After Lehman Brothers' bankruptcy in late 2008, the central banks expanded swap activities to stabilize the world banking system, a primary reason for the large expansion in the volume of swap [21]. Spot transactions ranked a close second in the FX instruments, rising to $2.0 trillion per day in April 2013 ( Figure 3).…”

Section: Turnover By Fx Instrumentsmentioning

confidence: 99%

Foreign Exchange Market: Institutional Structure, Regulation, and Policy Implications

Su¹,

Zhao²

2017

JFE

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Electronic trading has transformed foreign exchange markets over the past decade, and the pace of innovation accelerates. This formerly two-tier market (namely, the interdealer and customer market) is now evolving into a multi-tier market and transaction costs are only a fraction of their former level. Entirely new agents have joined the fray, including retail and high-frequency traders, while foreign exchange trading volumes have almost tripled to 5.3 trillion dollars daily according to Bank for International Settlements 2013. Market concentration among dealers has risen reflecting the heavy investments in technology. This paper outlines the players in this market and the structure of their interactions. It also presents new evidence on how that structure has changed over the past two decades. Throughout, it highlights issues relevant to market regulation and exchange rate modelling.

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The crisis in the foreign exchange market

Cited by 226 publications

References 5 publications

Does linkage fuel the fire? The transmission of financial stress across the markets

Does linkage fuel the fire? The transmission of financial stress across the markets

Theoretical Framework of Foreign Exchange Exposure, Competition and the Market Value of Domestic Corporations

Foreign Exchange Market: Institutional Structure, Regulation, and Policy Implications

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