Search

In this paper, we explore the applications of fractional stochastic volatility (FSV) models within the realm of market microstructure theory and optimal execution strategies. FSV models extend traditional stochastic volatility frameworks by incorporating fractional differentiation, allowing for more flexible and realistic representations of asset price dynamics over time. Our investigation begins with an introduction to FSV models, highlighting their ability to capture longmemory effects and volatility clustering observed in financial markets. These models provide a robust framework for understanding market microstructure dynamics, including order flow behavior, price impact functions, and liquidity provision mechanisms. Furthermore, we discuss recent advancements and empirical findings using FSV models, emphasizing their role in uncovering intraday volatility patterns and their implications for trading strategies under varying market conditions. By incorporating these nuanced volatility dynamics, FSV models contribute to the development of optimal execution algorithms that enhance transaction cost efficiency and market stability. The FSV model, when the Hurst exponent H is set to 0.5, effectively reduces to a standard stochastic volatility model. THis nested relationship can be formally demonstrated by considering the FSV model's general form and showing that for H = 0.5, the fractional Brownian motion BH(t) becomes a standard Brownian motion W (t), thereby aligning the FSV model with traditional models. Overall, our analysis underscores the significance of FSV models in advancing both theoretical insights and practical applications in modern finance, offering new avenues for research in high-frequency trading strategies and market efficiency. [ABSTRACT FROM AUTHOR]

With technological advancements in networking and wireless communication, the flying ad hoc network has emerged as a cost-effective relay network. Networks of unmanned aerial vehicles (UAVs) can be cooperatively organized as an ad hoc network for effectively accomplishing complex tasks. Such a UAV network is deployed as a relay network that forwards and exchanges accurate and reliable end-to-end in-formation. However, the design of routing protocols is rendered difficult by flying constraints and extreme topology changes over a short time period. The performance of the routing protocols in such networks is considerably affected by high-speed nodes and extreme topology changes. Evaluating the routing protocol in a UAV network gives insight regarding the performance of the entire network. This paper evaluates, analyzes, and compares the performances of three routing protocols: Ad hoc On-demand Distance Vector (AODV), Optimized Link State Routing (OLSR), and Destination-Sequenced Distance-Vector (DSDV). In most of the simulated cases, the AODV outperformed the OLSR and DSDV. The number of nodes, i.e., the network size, largely affected the throughput, packet delivery ratio (PDR), and end-to-end delay (E2E) of the network. However, the OLSR improved the performance of the average E2E; therefore, it is suitable for delay-sensitive applications. However, AODV outperformed the other protocols in terms of throughput and PDR because it reacts to topology changes. DSDV delivered the poorest PDR and throughput. [ABSTRACT FROM AUTHOR]

Following the introduction of EUR/USD futures and USD/JPY futures on 31 October 2022, Thailand Futures Exchange first entered the top 11 list of derivatives exchanges based on foreign exchange derivative volumes in 2022. This paper investigates the dynamics of foreign exchange futures trading volumes in Thailand through the VAR(2) model. Trading volumes of EUR/USD futures, USD/JPY futures, and USD/THB futures are considered over the sample period from 31 October 2022 to 12 January 2024. The empirical results provide no evidence that the trading volume of EUR/USD futures is dependent on the past trading volumes of USD/JPY futures and USD/THB futures. The Granger causality test results show the existence of bidirectional causality between the trading volumes of USD/JPY futures and USD/THB futures. The results of the impulse response function are consistent with the sign results of the VAR(2) model, showing that the USD/JPY futures trading volume has a negative impact on the USD/THB futures trading volume, and vice versa. The analysis of variance decomposition shows that the variability of the USD/JPY futures trading volume and USD/THB futures trading volume, apart from its own shock, is explained by other FX futures trading volume shocks. Therefore, traders should pay more attention to new FX futures trading activity due to its negative impact on the USD/THB futures trading volume and its contribution to the variance in the USD/THB futures trading volume. Understanding the futures trading volume relationship also helps Thailand Futures Exchange develop new products and services that can foster market liquidity and stability. [ABSTRACT FROM AUTHOR]

This study measures the asymptotic dependence between spot and futures losses and investigates its impact on hedging effectiveness using data from stock, currency, and commodity markets. The findings reveal that stock futures contracts show strong asymptotic dependence, while currency futures have weak asymptotic dependence and most commodity futures lack asymptotic dependence with the underlying spots. Further, stock futures have the highest hedging effectiveness, while commodity and currency futures show low hedging effectiveness for downside risk. Results also suggest that asymptotic dependence is critical for minimum‐variance hedging. Asymptotic dependence increases with the hedging horizon, leading to a better hedging performance of the futures. It also appears that the hedging strategies sensitive to asymptotic dependence perform better than the competing models. The results for the entire period and the subsample periods offer similar conclusions. [ABSTRACT FROM AUTHOR]

This paper investigates how the introduction of foreign exchange futures has an impact on spot volatility and considers the contemporaneous and dynamic relationship between spot volatility and foreign exchange futures trading activity, including trading volume and open interest in the Thailand Futures Exchange context, with the examples of the EUR/USD futures and USD/JPY futures. The results of the EGARCH (1,1) model show that the introduction of foreign exchange futures decreases spot volatility. It also increases the rate at which new information is impounded into spot prices but decreases the persistency of volatility shocks. A positive effect of unexpected trading volume and a negative effect of unexpected open interest on contemporaneous spot volatility are in line with the VAR(1) model results of the dynamic relationship between spot volatility and foreign exchange futures trading activity. With the impact on spot volatility caused by unexpected open interest rate being stronger than by unexpected trading volume, foreign exchange futures trading stabilizes spot volatility. [ABSTRACT FROM AUTHOR]

This paper aims to study the phased influencing factors of renminbi (RMB) exchange rate (CNY against USD) and investigate the predictability of the factors selected by multimodel. We first take the time points when China's main exchange reform policies are launched as the demarcation points and divide the entire sample from July 2005 to December 2020 into three periods. Then, we select the potential predictors using several sources, including all factors (without any selection), the factors selected by each of the five commonly used machine learning methods, the significantly correlated factors selected by traditional regression analysis method, and multimodel‐driven factors. Finally, we predict the exchange rate based on the above selected factors and compare the prediction results. The research results show that the main influencing factors are different in different periods, and the influence of phase events cannot be ignored. Even if their influence on the exchange rate has decreased as a result of the "811" exchange rate reform, the money supply and foreign exchange reserves continue to be the primary drivers of RMB exchange rates during the whole period of the sample. Additionally, RMB exchange rate forward is a robust influencing factor in all periods. By comparing the forecast errors, we find that the prediction accuracy of the factors selected based on multimodel is higher than that of the factors selected based on a single method or the tradition method. The findings of this paper provide the following insights for exchange rate managers: In exchange rate risk management, it is important to pay attention to the impact of macroeconomic factors such as foreign exchange reserves and the impact of staged events, and market expectations of exchange rates are equally important. At the technical level, it is recommended to improve the forecasting accuracy by forecasting exchange rates based on common factors selected by multiple better machine learning methods simultaneously rather than those selected by a single method. [ABSTRACT FROM AUTHOR]

Following the introduction of EUR/USD futures and USD/JPY futures on 31 October 2022, Thailand Futures Exchange first entered the top 11 list of derivatives exchanges based on foreign exchange derivative volumes in 2022. This paper investigates the dynamics of foreign exchange futures trading volumes in Thailand through the VAR(2) model. Trading volumes of EUR/USD futures, USD/JPY futures, and USD/THB futures are considered over the sample period from 31 October 2022 to 12 January 2024. The empirical results provide no evidence that the trading volume of EUR/USD futures is dependent on the past trading volumes of USD/JPY futures and USD/THB futures. The Granger causality test results show the existence of bidirectional causality between the trading volumes of USD/JPY futures and USD/THB futures. The results of the impulse response function are consistent with the sign results of the VAR(2) model, showing that the USD/JPY futures trading volume has a negative impact on the USD/THB futures trading volume, and vice versa. The analysis of variance decomposition shows that the variability of the USD/JPY futures trading volume and USD/THB futures trading volume, apart from its own shock, is explained by other FX futures trading volume shocks. Therefore, traders should pay more attention to new FX futures trading activity due to its negative impact on the USD/THB futures trading volume and its contribution to the variance in the USD/THB futures trading volume. Understanding the futures trading volume relationship also helps Thailand Futures Exchange develop new products and services that can foster market liquidity and stability.

Prior to September 2021, USD Futures could only be traded during the regular hours in Thailand Futures Exchange (TFEX). An additional trading session at night, while trading in both London and New York exchanges is active, enables investors to better handle their foreign exchange exposure or speculative needs of the moment. However, understanding volatility behavior is crucial for achieving successful trading. Therefore, this study investigates the impact of night trading sessions on the USD Futures volatility using GARCH family models. The USD Futures market volatility is examined through comparative analysis before and after the introduction of the night trading session. Both TARCH and EGARCH models have revealed no existence of leverage effect over the sample period - from January 2, 2020 to December 30, 2022. The GARCH model has proved to be the most accurate model for describing USD Futures volatility. Following the launch of nighttime trading, USD Futures market has experienced higher and more persistent volatility. In response to an increase in the volatility of USD Futures, TFEX should increase its margin requirement and monitor the speculative movements in futures market for their possible destabilizing effect. Investors should also adjust their hedge ratio to manage risk more appropriately and incorporate an extended period of increased uncertainty into their trading strategies. [ABSTRACT FROM AUTHOR]

This article discusses a special issue of the journal Languages in Contrast, which focuses on comparing crosslinguistic complexity. The issue includes six papers that explore structural differences and degrees of complexity in English compared to other languages such as German, Norwegian, Spanish, and Swedish. The papers cover various aspects of complexity, including lexical complexity, morphosyntactic complexity, and phrasal and clausal complexity. The findings shed new light on the differences in complexity across languages and aim to inspire further research in this area. [Extracted from the article]

We estimate the determinants (terms of trade, tradable to non-tradable price differentials, interest rate differentials, forward exchange rate and risk premium) of the Mexican bilateral real exchange rate (q) for the short and long run by using an Autoregressive Distributed Lag model (ARDL, Pesaran and Shin et al. (2001)) for Mexico (2001.01–2022.12). The inclusion of commercial and financial variables and finding empirical evidence of cointegration only for 2009.01–2022.12 are the main contributions. Our results indicate no cointegrating relationship either for the entire sample, or for 2001.01–2008.12. This finding has to do with the increasing international financialization process, after the 2008–2009 Great Financial Crisis. Using a double log model we find that: a) there is a strong short-run autoregressive effect of q of up to 4 lags (0.75), b) that the Balassa-Samuelson Effect is the largest in the model (-0.27 and -1.11 for short and long terms), c) the next most important factor is the terms of trade (-0.126 and -0.51, respectively), d) there are considerable, although lesser, effects of financial variables: forward exchange rate (0.0155 and 0.063, respectively) and risk-premium (0.009 and 0.036, respectively), e) there is a clear long-term trend of real depreciation expressed by the trend of 0.0020, which suggests that the PPP hypothesis applies. [ABSTRACT FROM AUTHOR]

Purpose: The author examines the presence of foreign currency effects and the risk-mitigation channel through which a foreign-currency denomination reduces the loan spread. Design/methodology/approach: The author runs regression analyses using loan data of firms incorporated in member countries of the Association of Southeast Asian Nations (ASEAN) from 2000 to 2020. The author also runs several robustness tests to address forward exchange rate bias, endogeneity concern and sample-selection bias. Findings: Consistent with the currency matching motive of foreign debt use, the results show that a foreign currency denomination is associated with a lower spread and the relationship is amplified when there is a positive correlation between the changes in the return on assets and in the exchange rate. Research limitations/implications: This paper enriches existing studies on the use of foreign debt as an exchange rate risk management tool. Practical implications: The results suggest that as firms utilize foreign debt and policymakers need to design banking regulations that not only oversee but also encourage the use of foreign debt as a hedging instrument to lower firms' borrowing costs. Originality/value: This paper contributes to extant studies by examining the presence of foreign currency effects in emerging countries' loan markets and by exploiting the micro-level demand-side factors as the channel through which the currency denomination affects the loan spread. [ABSTRACT FROM AUTHOR]

Daniel M. Grimley's book, "Delius and the Sound of Place," has transformed the understanding of Delius and his music in recent years. The book explores Delius's place in debates about cosmopolitanism and British musical identity, as well as his relationship with other composers such as Wagner, Grieg, Elgar, and Debussy. Grimley's analysis delves into various themes and settings in Delius's music, including place, idyll, river, drift, village, hill, and garden. The book offers a musically meaningful and complex perspective on Delius's work, requiring sustained concentration from readers. [Extracted from the article]

This paper investigates how the introduction of foreign exchange futures has an impact on spot volatility and considers the contemporaneous and dynamic relationship between spot volatility and foreign exchange futures trading activity, including trading volume and open interest in the Thailand Futures Exchange context, with the examples of the EUR/USD futures and USD/JPY futures. The results of the EGARCH (1,1) model show that the introduction of foreign exchange futures decreases spot volatility. It also increases the rate at which new information is impounded into spot prices but decreases the persistency of volatility shocks. A positive effect of unexpected trading volume and a negative effect of unexpected open interest on contemporaneous spot volatility are in line with the VAR(1) model results of the dynamic relationship between spot volatility and foreign exchange futures trading activity. With the impact on spot volatility caused by unexpected open interest rate being stronger than by unexpected trading volume, foreign exchange futures trading stabilizes spot volatility.

The Thailand Futures Exchange launched USD Futures as the first currency futures contract on 5 June 2012. However, it has been available for night trading since 27 September 2021. This research aims to analyze the effect of adding a night trading session on USD Futures market liquidity and to make a liquidity comparison between day and night session trading. By adding a dummy variable into the vector autoregression model of order 5 to capture the effect of a night session introduction on market liquidity, the results show that market depth and breadth are even stronger after a longer trading session. In addition, the t-test results show the presence of lower tightness but stronger depth and breadth in day session trading than in night session trading, because of the availability of a large number of orders and the ability of the market to have smoother trading in day as opposed to night. Due to the positive effect of extended trading hours on market depth and breadth, TFEX should consider a longer night session in line with other global futures markets. Night traders should also be aware of liquidity risk due to low night session trading volume. [ABSTRACT FROM AUTHOR]

In The digital era, cryptocurrency is one of the innovations created from human dissatisfaction with the existing financial system, thus giving birth to a digital currency that has the same function as other currencies, but does not have a physical form like currency in general, but in the form of a digital currency data blocks, and is able to document transactions directly without the help of third parties through a network called Blockchain. Although it is considered a substitute for future digital currencies and provides many benefits to its users, the regulation and legality of cryptocurrencies are still questioned, especially in Islamic economic principles. This study aims to find out more about the description, regulation and legality of cryptocurrencies in Indonesia and what the perspective of cryptocurrency in Islamic financial principles. The research model used is library research, by collecting data in the form of journals, books, websites, and other objects that are considered relevant and then carried out an in-depth study through descriptive qualitative analysis methods. [ABSTRACT FROM AUTHOR]

The present paper proposes new international portfolio optimization problems when the foreign exchange rates and the future security prices are modelled by uncertain variables, given by experts' estimations and predicted by experts instead of historical data. The use of uncertain measure is justified. We provide Mean-VaR models for international portfolio Some real-world constraints such as portfolio diversification and transaction costs were taken into consideration. In addition, equivalent deterministic forms have been proposed when security prices and exchange rates follow certain types of uncertainty distributions. Finally, numerical applications are given to establish the impact of reality factors considered on uncertain international portfolio investment. [ABSTRACT FROM AUTHOR]

A large literature estimates the impact of currency unions on trade. Often ignored in these estimates are the dramatic differences in the characteristics of countries adopting common currencies, hidden by aggregation into a single currency union effect. I show that currency unions have substantial differences in their observable characteristics, relative to non-unions, making them a poor comparison group for estimation of policy treatment. Further, these differences are heterogeneous across individual currency unions, making one aggregate estimate likely inappropriate. Using inverse propensity score methods, I find that adjusting these gravity equation estimates to account these differences, both via weighting and via sample adjustment, meaningfully impacts the estimated policy effects. I find a wide range of currency union effects across individual, disaggregated, currency unions. My results suggest that future work on currency unions, and other macroeconomic policies, should be careful to check for such underlying heterogeneity when estimating policy effects. [ABSTRACT FROM AUTHOR]

This report attempts to look into the future of the global monetary system. The history and development of fiat currencies is reviewed, their strengths and weaknesses are presented, causing market stability or instability and recession, respectively. Attention is paid to the global processes affecting the traditional money markets and the accumulated experience of the institutions to deal with the crises. The increasing digitization in the industry, the economy and the daily life of every single person inevitably gives rise to the need for the use of digital currency to guarantee transactions between individual parties. The idea for these still unrealized needs was born nearly 40 years ago, and the first realization took place in 1996, when e-gold was born. Today, we have hundreds of cryptocurrencies that still operate in an unregulated market, and their legal status still varies from country to country. The desire of individual countries and banking institutions to start their legally regulated use by already developing and testing their own currencies is presented. [ABSTRACT FROM AUTHOR]

It is widely recognized that technology, information and applications are often integrated into everyday life, including purchasing, services and remote learning. Even traditionally conservative industries such as banking are adopting and developing digital applications for financial transactions. However, the popularity and potential of financial currencies which are defined as digital currencies or cryptocurrencies, are still uncertain and subject to debate not only among academics and the user community but also among experts. This study examines public perceptions and concerns about cryptocurrencies compared to academics' perceptions of this unique currency. The findings of this study suggest that legislation of cryptocurrencies is far from satisfactory and that other issues related to cryptocurrencies should also be considered in future studies. The conclusions and implications of the study are discussed. [ABSTRACT FROM AUTHOR]

The foreign exchange markets, renowned as the largest financial markets globally, also stand out as one of the most intricate due to their substantial volatility, nonlinearity, and irregular nature. Owing to these challenging attributes, various research endeavors have been undertaken to effectively forecast future currency prices in foreign exchange with precision. The studies performed have built models utilizing statistical methods, being the Monte Carlo algorithm the most popular. In this study, we propose to apply Auxiliary-Field Quantum Monte Carlo to increase the precision of the FOREX markets models from different sample sizes to test simulations in different stress contexts. Our findings reveal that the implementation of Auxiliary-Field Quantum Monte Carlo significantly enhances the accuracy of these models, as evidenced by the minimal error and consistent estimations achieved in the FOREX market. This research holds valuable implications for both the general public and financial institutions, empowering them to effectively anticipate significant volatility in exchange rate trends and the associated risks. These insights provide crucial guidance for future decision-making processes. [ABSTRACT FROM AUTHOR]

We study the risk management problem of a hydropower producer that hedges risk by trading currency and power futures contracts. The model considers three types of risks: operational risk due to supply uncertainty, profit risk due to power price variability, and exchange rate risk when operation and trading take place in different currencies. We cast the problem as a Markov decision process and propose a sequential solution approach that separates operational management from trading. To solve the problem, we first reduce the high-dimensional Markovian process that models inflows, exchange rates, and future curve dynamics to a scenario lattice and then employ stochastic dual dynamic programming under a risk measure. We find that dynamic hedging leads to significant risk reduction and that it performs better than static hedge ratios that are often used in practice. We also find that a sequential approach leads to better outcomes than an integrated approach across various metrics, which supports the functional separation of operation and hedging that is common practice in most power companies. [ABSTRACT FROM AUTHOR]

As global inflation escalates and geopolitical conflicts exacerbate, the world's economy confronts an intensified degree of instability. In this volatile environment, blockchain currencies emerge as a potential bulwark, offering both value preservation and liquidity benefits. However, the conventional "mining" process introduces significant challenges, such as high energy consumption, data security risks, and detachment from the real economy, which potentially facilitate financial capital manipulation. This research endeavors to mitigate these issues, constructing an innovative blockchain cryptocurrency framework that integrates mining and distribution with intelligent big data. It also incorporates social contributions from individuals in domains such as health, knowledge, and ecological conservation. Consequently, the efficiency of cryptocurrency production and distribution correlates with the individual's societal contribution. The more substantial the contribution, the higher the intrinsic value of the individual and the more efficient the access. Utilizing a comprehensive framework of mathematical modeling, computer numerical simulation, and fuzzy integrated evaluation, we propose a novel endogenous-value blockchain cryptocurrency system. We quantify and optimize variables such as individual intrinsic value, community efficiency, redistribution weights, and total monetary potential. We introduce an innovative method for accumulating time-decaying values such as knowledge contribution and establish an anti-cheating framework. Our results indicate that this pioneering approach can significantly enhance mining efficiency and optimize cryptocurrency distribution. This counters traditional criticisms of blockchain currencies and paves the way for a more sustainable, fair, and efficient model for future blockchain currency systems. [ABSTRACT FROM AUTHOR]

The role of monetary policy has become increasingly important in recent years, as a range of economic challenges have emerged, affecting both developing and economically advanced countries. The aim of this article is to examine the shift in the monetary policy of the EU, which has been expressed through changes in the tools used by the European Central Bank (ECB), and to consider the causes and economic implications of this shift. The descriptive analytical method was used to achieve this goal. The study identified that the aim of the ECB's interest rate increases was primarily to slow down core inflation rates. The ECB has raised the refinancing rate from 0.5% to 2.5% in 2022 and halted asset purchase programs, such as the Pandemic Emergency Purchase Programme, which had previously stimulated liquidity growth. Despite these changes, forward guidance has been maintained as a useful tool for providing clarity and certainty to financial markets and the public about the future path of monetary policy. It is concluded in the study that the impact of the shift towards contractionary monetary policy is likely to be felt across a range of economic sectors, with higher borrowing costs potentially leading to reduced investment and lower levels of economic growth. [ABSTRACT FROM AUTHOR]

Predicting the future price of the currency has always been considered one of the most challenging issues. In this paper, we utilize different artificial neural networks (ANNs), including Feedforwardnet, Fitnet, and Cascade networks, and predict the future price of Bitcoin. This paper discusses how a combination of technical attributes, like price-related and lagged features, as inputs of the neural networks, are used to raise the prediction capabilities that directly impact into the final profitability. For empirical analysis, this paper uses the data of the Bitcoin price for a period of 9 months (1.1.2018 - 30.9.2018) available on . Using a ten-fold cross-validation method, this paper finds the optimal number of hidden neurons for different train functions in each ANN based on error measures, including mean squared error (MSE), mean absolute error (MAE) and mean absolute percentage error (MAPE). Then, the Bitcoin price is predicted, and results are compared based on the amount of R to find out which ANN leads to a better prediction. Finally, this paper concludes that the Fitnet network with trainlm function and 30 hidden neurons outweighs the others. This paper assesses the models' performance and how specific setups produce principled and stable predictions for beneficial trading. [ABSTRACT FROM AUTHOR]

Vehicle ad-hoc network (VANET) is interconnected through message forwarding and exchanging among vehicle nodes. Due to its highly dynamic topology and its wireless and heterogeneous communication mode, VANET is more vulnerable to security threats from multiple parties. Compared to entity-based security authentication, it is essential to consider how to protect the security of the data itself. Existing studies have evaluated the reliability of interactive data through reputation quantification, but there are still some issues in the design of secure reputation management schemes, such as its low efficiency, poor security, and unreliable management. Aiming at the above-mentioned issues, in this paper we propose an effective VANET model with a secure reputation based on a blockchain, and it is called the double-layer blockchain-based reputation evaluation & management model (DBREMM). In the DBREMM, we design a reputation management model based on two parallel blockchains that work collaboratively, and these are called the event chain and reputation chain. A complete set of reputation evaluation schemes is presented. Our schemes can reduce observation errors and improve evaluation reliability during trust computation by using direct trust calculation based on the multi-factor Bayesian inference. Additionally, we propose an indirect trust calculation based on the historical accumulated reputation value with an attenuation factor, and a secure a reputation fusion scheme based on the number threshold with the fluctuation factor, which can reduce the possibility of attacks, such as collusive attacks and false information injection. Theoretical analysis and extensive simulation experiments reflect the DBREMM's security algorithm effectiveness, accuracy, and ability to resist several attacks. [ABSTRACT FROM AUTHOR]

Non-interest income is an important source of revenue for financial institutions. It speaks of earnings derived from sources other than interest on loans and deposits. Fees, commissions, profits from the sale of securities, and other forms of revenue fall under this category. In this study, we'll look at non-interest income's significance, its causes, and how it affects the financial performance of the banking industry based on the Georgian example. Given research will analyze the dynamics of possible currency speculation behavior of the banking system, especially in the conditions of sharp currency fluctuations and the trend of devaluation of the local currency. A specific role is devoted to currency speculations using foreign exchange operations, using open positions of net assets (long position) or net liabilities (short position) in foreign currency. It is based on conscious calculations based on the expectation of the future price of the foreign currency. The comparative analysis method is used for the analysis and evaluations. [ABSTRACT FROM AUTHOR]

The forward premium anomaly, which refers to the empirical failure of the uncovered interest parity (UIP), has been primarily examined by the forward premium regression of [Fama, E. (1984). Forward and spot exchange rates. Journal of Monetary Economics, 14(3), 319–338. https://doi.org/10.1016/0304-3932(84)90046-1]. Some studies apply the rolling-window regression to capture the time-varying coefficient on the forward premium, with difficulty in statistically testing the deviation of the coefficient from the UIP over time. We follow [Baillie, R., & Kim, K. (2015). Was it risk? Or was it fundamentals? Explaining excess currency returns with kernel smoothed regressions. Journal of Empirical Finance, 34, 99–111] to apply the simultaneous inference procedure to the Korean Won-US Dollar spot and forward exchange rates by estimating the time-varying coefficient from the kernel-smoothed local-linear regression and constructing the uniform confidence band to test the local deviation. We find that, while the UIP is not rejected from the baseline regression, the simultaneous inference shows that the deviation from the UIP is mainly observed during the early 2000s and 2010s. Time-variation of the forward premium coefficient tends to be significantly affected by economic uncertainties such as the interest rate, inflation, and stock return volatilities in Korea and US. [ABSTRACT FROM AUTHOR]

We present a novel tool for generating speculative and hedging foreign exchange (FX) trading policies. Our solution provides a schedule that determines trades in each rebalancing period based on future currency prices, net foreign account positions, and incoming (outgoing) flows from business operations. To obtain such policies, we construct a multistage stochastic programming (MSP) model and solve it using the stochastic dual dynamic programming (SDDP) numerical method, which specializes in solving high-dimensional MSP models. We construct our methodology within an open-source SDDP package, avoiding implementing the method from scratch. To measure the performance of our policies, we model FX prices as a mean-reverting stochastic process with random events that incorporate stochastic trends. We calibrate this price model on seven currency pairs, demonstrating that our trading policies not only outperform the benchmarks for each currency, but may also be close to ex-post optimal solutions. We also show how the tool can be used to generate more or less conservative strategies by adjusting the risk tolerance, and how it can be used in a variety of contexts and time scales, ranging from intraday speculative trading to monthly hedging for business operations. Finally, we examine the impact of increasing trade policy uncertainty (TPU) levels on our findings. Our findings show that the volatility of currencies from emerging economies rises in comparison to currencies from developed markets. We discover that an increase in the TPU level has no effect on the average profit obtained by our method. However, the risk exposure of the policies increases (decreases) for the group of currencies from emerging (developed) markets. [ABSTRACT FROM AUTHOR]

Bitcoin, regarded as a decentralized currency of the future as well as a digital gold, faces various challenges, such as scalability, the geographical concentration of mining, its politically informed design and history, its high market volatility, and inequalities in the proportion of accumulation. However, the number of Bitcoin owners has risen exponentially, and relevant socioeconomic and political groups have become increasingly diverse. Consequently, this article argues that what has contributed to the global diffusion of Bitcoin and its embeddedness in different human societies is its practical indeterminacy. Practical indeterminacy characterizes the fundamentally undefinable, indeterminate nature of Bitcoin's value, as it can change its form depending on who it encounters. In terms of temporality, practically indeterminate Bitcoin can urge potential owners and users to compare their pasts and futures, thus driving them to perceive, own, and use Bitcoin for their own purposes. By paying attention to the agency of Bitcoin, practical indeterminacy explains how individuals form their own relations with Bitcoin and how these relations lead to Bitcoin's further sociocultural embeddedness. The proliferation of such a wide range of human–Bitcoin relations shows that Bitcoin is not only monetary but also cultural, as it offers different meanings to users and owners. [ABSTRACT FROM AUTHOR]

Nigeria government has been playing the role of internalizing economic externalities, dealing with issue of unemployment and overall welfare of the populace. However, in the presence of huge and rising government expenditure, unemployment, and inflation rate still persist. This therefore called for a revisit of what determines government expenditure. There are three issues yet unresolved in the debate of what drives government expenditure. These are omitted variables bias, aggregation bias and asymmetry issue. To deal with aggregation bias, we focus on the components of government expenditure, that is, capital and recurrent. To address the issue of asymmetry, nonlinear autoregressive distributed lag was employed. Data are obtained for relevant variables spanning 1981- 2021. Model of government expenditure developed by Peacock and Wiseman (1961) combined with Devarajan et al (1996) and Giavazzi, et al (2000) models are utilized. The following results are obtained. First, government capital expenditure is countercyclical while recurrent expenditure is procyclical. Second, some drivers of government expenditure, such as exchange rate and oil price, exhibit asymmetry behavior. Asymmetric tax revenue shows potential to drive capital expenditure but significantly and positively influences recurrent expenditure. Asymmetric behavior of oil revenue and exchange rate also engenders capital expenditure. However, asymmetric behavior of degree of openness and inflation rate negatively affects capital expenditure. Asymmetric behavior of tax revenue and oil revenue posted positive effect while exchange rate and degree of openness have negative effect on recurrent expenditure. Period of election is also a strong positive determinant of recurrent expenditure both in the short and long run. Following the nature of cyclicality of the component of government expenditure, the priority of government could be on capital expenditure since it will provide essential public goods required for the economy to flourish. Bearing in mind that oil revenue is volatile, it is imperative for government to rely more on tax revenue than oil revenue. Engaging in forward exchange rate might be appropriate to deal with any possible exchange rate fluctuation. [ABSTRACT FROM AUTHOR]

The present study attempts to examine hedging effectiveness of equity and currency futures contracts traded at the National Stock Exchange of India, by taking a sample size of three benchmark indices of equity futures market (NIFTY50, NIFTYIT, and BANKNIFTY) and four currency futures contracts (USD, YEN, EURO, and GBP). For estimating optimal hedge ratios, five constant hedge ratio models and three time-varying hedge ratio models have been used. For estimating hedging effectiveness, two approaches have been used, i.e., variance reduction approach and risk-return approach. The findings of the study indicate that hedging effectiveness is higher in equity futures contracts (more than 96 per cent); in currency futures contracts, it is less than 40 per cent. Another significant finding is that constant hedge ratio models generate superior hedging effectiveness, irrespective of the approach used for estimating hedging effectiveness. Hence, the present study is also an addition to the existing literature that supports superiority of constant hedge ratios over time-varying hedge ratios. [ABSTRACT FROM AUTHOR]

Copyright of Mexican Journal of Economics & Finance / Revista Mexicana de Economia y Finanzas is the property of Instituto Mexicano de Ejecutivos de Finanzas and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Journal of College of Sharia & Islamic Studies is the property of Qatar University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The Regulation of Digital Currency in China - Past, Present, and Future: China has been at the forefront of experimenting with digital currencies, starting from the decentralized cryptocurrencies (cryptos) in the late 2000s to the most recent state-controlled central bank digital currency (CBDC). This article reviews China's history of digital currencies and examines its unique regulatory approach to both cryptos and CBDC. Reflecting on China's concerns and ambitions, this article further explores the anticipated future of digital currencies in China with a particular focus on China's regulatory developments. It concludes that e-CNY, a state-controlled CBDC, is China's future of money, although that means China must navigate an increasingly complex regulatory landscape. [ABSTRACT FROM AUTHOR]

Currency salam is a financial product in the basket of Islamic finance that facilitates dealings in discounting of bills. Moreover, it allows provision for speculative future currency trading. This article shows that currency salam is prohibited in the light of Islamic rules of riba. Researchers have held three positions about modern currencies. The paper shows that the permissibility of currency salam is derived by combining together these three irreconcilable views about modern currencies. In other words, currency salam is the outcome of a fallacious methodology known as talfeeq which is merely a device of creating legal artifices (hiyal) for satisfying one's desires. It is argued that the permission of currency salam must be rejected because it is riba and it opens up the flood‐gate for financial speculations in the name of Islam. The paper also attempts to draw attention of the regulatory authorities to tackle this issue seriously as it will adversely affect the trust on Islamic banking regarding its Shariah compliance. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Financial Politic & Economic Reviews / Finans Politik & Ekonomik Yorumlar is the property of Journal of Financial Politic & Economic Reviews / Finans Politik & Ekomomik Yorumlar and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The arguably most important paradox of financial economics—the excess volatility puzzle—first identified by Robert Shiller in 1981 states that asset prices fluctuate much more than information about their fundamental value. We show that this phenomenon is associated with an intrinsic propensity for financial markets to evolve towards instabilities. These properties, exemplified for two major financial markets, the foreign exchange and equity futures markets, can be expected to be generic in other complex systems where excess fluctuations result from the interplay between exogenous driving and endogenous feedback. Using an exact mapping of the key property (volatility/variance) of the price diffusion process onto that of a point process (arrival intensity of price changes), together with a self-excited epidemic model, we introduce a novel decomposition of the volatility of price fluctuations into an exogenous (i.e. efficient) component and an endogenous (i.e. inefficient) excess component. The endogenous excess volatility is found to be substantial, largely stable at longer time scales and thus provides a plausible explanation for the excess volatility puzzle. Our theory rationalises the remarkable fact that small stochastic exogenous fluctuations at the micro-scale of milliseconds to seconds are renormalised into long-term excess volatility with an amplification factor of around 5 for equity futures and 2 for exchange rates, in line with models including economic fundamentals explicitly. [ABSTRACT FROM AUTHOR]

Cellular ATP that is consumed to perform energetically expensive tasks must be replenished by new ATP through the activation of metabolism. Neuronal stimulation, an energetically demanding process, transiently activates aerobic glycolysis, but the precise mechanism underlying this glycolysis activation has not been determined. We previously showed that neuronal glycolysis is correlated with Ca2+ influx, but is not activated by feedforward Ca2+ signaling (Díaz-García et al., 2021a). Since ATP-powered Na+ and Ca2+ pumping activities are increased following stimulation to restore ion gradients and are estimated to consume most neuronal ATP, we aimed to determine if they are coupled to neuronal glycolysis activation. By using two-photon imaging of fluorescent biosensors and dyes in dentate granule cell somas of acute mouse hippocampal slices, we observed that production of cytoplasmic NADH, a byproduct of glycolysis, is strongly coupled to changes in intracellular Na+, while intracellular Ca2+ could only increase NADH production if both forward Na+/Ca2+ exchange and Na+/K+ pump activity were intact. Additionally, antidromic stimulation-induced intracellular [Na+] increases were reduced >50% by blocking Ca2+ entry. These results indicate that neuronal glycolysis activation is predominantly a response to an increase in activity of the Na+/K+ pump, which is strongly potentiated by Na+ influx through the Na+/Ca2+ exchanger during extrusion of Ca2+ following stimulation. [ABSTRACT FROM AUTHOR]

Virtual currencies have been part of economic reality for more than a decade but have only become the subject of legal regulation at European and national level in recent years. This is in a sense natural, since law as a normative system reacts only with a certain time lag to already existing facts, circumstances, and relations which, due to their impact, require legal regulation. The author deals with the legal nature of virtual currencies and their relationship to categories such as money, currency, crypto assets. The article then defines their regulatory framework and taxation in terms of de lege lata and de lege ferenda. The paper concludes with thoughts towards the future of virtual currencies in financial and tax law. [ABSTRACT FROM AUTHOR]

Given the high fluctuations of the general price level, the importance of investment, and accessing sufficient financial resources, we examine the effects of monetary policy on the nominal (Inflation) and real (Investment) sectors of a developing economy, like Iran, through the channel of the relationship between bank deposits, stock market, and speculation in the foreign exchange market (FEM). For this purpose, due to regime switching in Iran's economy, the non-linear relation between the variables has been investigated by applying Markov switching models and annual data of 1988–2018. The results show that the financial intermediaries (FIs) have not had a complementary relationship in both bear and bull market and high and low banks deposits regimes. Both FIs have negatively impacted speculation in the FEM in high and low exchange rates difference regimes. The difference between official and unofficial exchange rates negatively impacted the FIs in bear market and low banks deposits regimes; on the contrary, a positive effect in a bull market and high bank deposits. The effects of both FIs on investment have been positive in high and low investment regimes and negative on inflation rates in high and very high inflation regimes. In comparison, the impact of speculation in the FEM has been negative on investment and positive on inflation. Therefore, in the event of the lack of limitations regarding using interest rate (IR) and the policy of exchange rate unification, the central bank would be able to affect the nominal and real sectors of the economy suitably through the channels of the FIs and the FEM. [ABSTRACT FROM AUTHOR]

The offshore RMB market has been showing a momentum of rapid development. However, the impact of this market on the RMB exchange rate has been less studied. This paper constructs an error correction model with structural mutations and focuses on the turning point for RMB Forward Rate, during the time before and after September 2011. The model is constructed considering the micro-institutional differences between domestic and offshore RMB forward exchange rates, the impact of spreads, the impact of spot exchange rates and international financial market shocks such as the VIX index of the US dollar index. We also apply the error correction model with abrupt changes method to select the model which is innovative. According to the results of the model, the domestic RMB foreign exchange derivatives market and the offshore RMB foreign exchange derivatives market jointly played a leading role in price discovery in the determination of both short-term and long-term RMB forward exchange rates, and we also found September 2011 was an important structural change point for the RMB forward curves both domestic and abroad. Before that period, interest rate parity did not play a positive role and the NDF exchange rate occupied the dominant role in price discovery; the domestic RMB forward exchange rate and the overseas NDF exchange rate were both driven by speculative factors. [ABSTRACT FROM AUTHOR]

Many agricultural commodities are traded in both forward and spot markets. This paper studies the interplay of random yield and forward market in a hybrid market with spot and forward transactions. We examine two main questions: (a) How does yield uncertainty (yield risk and yield correlation) affect the equilibrium outcome in this hybrid market? (b) How does the existence of a forward market influence the firms' strategic behaviors and spot price volatility, and how does yield uncertainty mediate the role of the forward market? In our baseline model that considers two firms and no withholding behavior by the firms, it is found that as yield risk increases, firms may sell less in the forward market, and counterintuitively, higher yield risk may benefit firms and make the spot price less volatile. The existence of a forward market leads to greater spot price volatility; that is, a forward market destabilizes spot prices. We identify a mitigating effect of yield variability, but an enhancing effect of yield correlation, on the role of the forward market. Finally, we extend our baseline model to the case with more than two firms and the setting where the firms may withhold some products and demonstrate that some of the key results in the baseline model carry over to these extensions. Nevertheless, the firms' withholding behavior represents a new driving force that changes some results. For example, the decreasing trend of spot price volatility in yield risk disappears in the withholding model. [ABSTRACT FROM AUTHOR]

Copyright of Ekonomske Ideje i Praksa is the property of Centar za Izdavacku Delatnost Ekonomskog Fakulteta u Beogradu and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Using intraday EUR–USD and JPY–USD data in both electronic futures and spot markets, we examine the important role played by order flow in price discovery and in intermediating the exchange‐rate reactions to macroeconomic news. We find that, after considering the order flows of futures and spot markets, the futures market dominates price discovery when compared with the spot market, confirming that order flows have a permanent impact on prices, even more so in futures markets. Furthermore, announcement surprises in gross domestic product, jobless claims, and nonfarm payroll affect both order flows and exchange‐rate changes. [ABSTRACT FROM AUTHOR]