Non-linearities in foreign exchange markets: a different perspective

Article Abstract:

A self-exciting threshold autoregression (SETAR) model is presented and used to analyze non-linearities in foreign exchange markets. The model is applied to 5 currencies with data over a 10-year period. Moderate exchange rate changes for the Japanese yen, the Italian lira, French franc and Swiss franc show fairly strong autocorrelation, though strong currency rate changes do not. Results were different for the German mark. Neither the SETAR model nor the standard GARCH model are found to be totally adequate for exchange rate non-linearity descriptions.

Models, Analysis, Nonlinear theories, Autoregression (Statistics), Foreign exchange market

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Intraday effects of foreign exchange intervention by the Bank of Japan

Article Abstract:

Test statistics of the equality of minute by minute return variances by the Bank of Japan reveal that volatility employing all quotes differs considerably across minutes at the 1% level, during durations starting 1 h before and 1 h after Reuters' intervention reports. A careful study of return variances in 30-min windows prior to intervention reports reveals that volatility has substantial variation, at the 5% level, in the durations [-45, -15] and [-60, -30] min before intervention reports.

Banking industry, Japan, Central banks

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Price volatility and margin requirements in foreign exchange futures markets

Article Abstract:

Price volatility is the most important determinant of margin levels in foreign exchange futures markets. It is also the most important factor for determining the default probability of a financial futures contract. However, no consistent relationship can be established between margin changes and price volatility. Government replacement of exchanges in the margin setting role to alter trading behavior is therefore not deemed feasible.

Finance, Futures market, Futures markets, Margins (Futures trading), Foreign exchange futures

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