What triggers market jitters? A chronicle of the Asian crisis

Article Abstract:

The role of rumors and unfavorable news as one of the causes of the Asian financial crisis is discussed. It has been established that rumors do affect investors, and even rational investors have a herd instinct. As a result, investors conduct speculative attacks even when market fundamentals are not worsening, so that the rumors become self-fulfilling. Analysis of market news for 1997-98 indicates that capital movements were most affected by local and neighboring-country news releases. The news become more credible when they are verified by agreements with the international community and credit rating agencies. It is suggested that investors have a tendency to overreact to bad news.

Other Financial Vehicles, Investors, not elsewhere classified, Investors NEC, Analysis, Beliefs, opinions and attitudes, Asia, Financial markets, Investors

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The impact of the listing of options in the foreign exchange market

Article Abstract:

The effect of foreign currency options and options on foreign currency futures on the underlying securities are analyzed for the British pound, the Canadian dollar, the German mark, the Japanese yen and the Swiss franc. Findings reveal that exchange rates become more stable after the listing of options for most of the currencies. The introduction of options also increases the trading volume and open interest in currency futures.

Prices and rates, Foreign exchange, Currency options, Foreign exchange rates

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Macroeconomic uncertainty and the risk premium in the foreign exchange market

Article Abstract:

Risk premium depends on the conditional variance and covariance of domestic and foreign money supply and production where money supply and production follow a VAR process with bivariate GARCH innovations. Results confirm previous findings that time-varying volatility in macroeconomic variables such as money and production causes risk premium, which in turn affects the foreign exchange rate.

Asset & Risk Management, Models, International finance, Uncertainty

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