Literature Review 1. Method Method and system system for deliveri delivering ng foreign foreign exchange exchange risk risk managemen managementt advisory advisory solutions to a designated market, Dec 2001 uthors! Lois "cheirer In this paper they suggest a Consistent with principles of the present invention, a method and system for delivering foreign exchange risk management advisory solutions to a designated marked is disclosed. For each user, the disclosed system generates an exposure model that is consistent with that user's risk management policy and a budget/pricing determination made in response response to user information and external pricing information. he disclosed system may further operate to determine an appropriate measurement of risk and associated hedge alternative for a user, consistent with economic forecasts, and process a re!uest for a hedge instrument from the user. "ario "arious us hedge instruments may be analy#ed and/or obtained through the disclosed system, including spot contracts, forward contracts, option contracts, and money market instruments. he disclosed system further provides extensive training, compliance and sales related features. 2. De#endence De#endence structur structuree $etween $etween the e%uity e%uity market market and the foreign foreign exchang exchangee market& co#ula a##roach, "e#t 2010. uthors! 'athy (ing In this paper they suggest that the dependence structure between the e!uity market and the foreign exchange market by using copulas. In particular, several copulas with different dependence structure are compared and used to directly model the underlying dependence structure. $e find that there exists significant symmetric upper and lower tail dependence between the two financial markets, and the dependence remains significant but weaker after the launch of the euro. %ur findings have important implications for both global investment risk management and international asset pricing by taking into account &oint tail risk.
). *nflation +ffect of oreign +xchange Reserve *ncrease and the +ffectiveness of Monetary "terili-ation olicy uthors! ang /ianming ei ing hang ihao In this paper they suggest to discover the inflation effect of foreign exchange reserve increase and the effectiveness of monetary sterili#ation policy in China. ased on the !uantitative monetary theory and China's reality, by using relevant literatures for reference, the paper establishes a special theory model by modifying and developing the model of (umhof )*++-. he empirical testing through China's seasonal data during the period of *++*++0 shows that the increase of foreign exchange reserve results in an obvious inflation effect, and the monetary sterili#ation policy of the central bank is effective on the whole, but the elasticity of monetary sterili#ation policy is not good enough. Finally, some implications are drawn from the test result. . "ystem and method for generating and executing insurance #olicies for foreign exchange losses, 3ct 2000 uthors! 4ay ". 5alker, 4ames . 4orasch In this paper they suggest a system and method for providing a foreign exchange insurance policy that automatically considers factors such as the type of currency, exchange rate, amount of coverage, and period of coverage, to determine a premium. 1sers can access the system using credit cards, 23s, banks or other media. 6. Rise of the Machines! lgorithmic 7rading in the oreign +xchange Market, "e#t 201 uthors! lain . 'ha$oud, 8en9amin 'hi%uoine, +rik :9almarsson nd 'lara ;ega In this paper they suggest the impact of algorithmic trading )2- in the foreign exchange market using a long time series of highfre!uency data that identify computergenerated trading activity. $e find that 2 causes an improvement in two measures of price efficiency4 the fre!uency of triangular arbitrage opportunities and
the autocorrelation of highfre!uency returns. $e show that the reduction in arbitrage opportunities is associated primarily with computers taking li!uidity. his result is consistent with the view that 2 improves informational efficiency by speeding up price discovery, but that it may also impose higher adverse selection costs on slower traders. In contrast, the reduction in the autocorrelation of returns owes more to the algorithmic provision of li!uidity. $e also find evidence consistent with the strategies of algorithmic traders being highly correlated. his correlation, however, does not appear to cause a degradation in market !uality, at least not on average. 5. oreign exchange ex#osure of . 'om$ining mean reversion and momentum trading strategies in foreign exchange markets, (ov 2010. uthors! lina . "er$an. In this paper they suggest the literature on e!uity markets documents the existence of mean reversion and momentum phenomena. 6esearchers in foreign exchange markets find that foreign exchange rates also display behaviors akin to momentum and mean reversion. his paper implements a trading strategy combining
mean reversion and momentum in foreign exchange markets. he strategy was originally designed for e!uity markets, but it also generates abnormal returns when applied to uncovered interest parity deviations for five countries. I find that the pattern for the positions thus created in the foreign exchange markets is !ualitatively similar to that found in the e!uity markets. 7uantitatively, this strategy performs better in foreign exchange markets than in e!uity markets. 2lso, it outperforms traditional foreign exchange trading strategies, such as carry trades and moving average rules. ?. +stimating risk of foreign exchange #ortfolio! @sing ;aR and ';aR $ased on AR':&+;7B'o#ula model, (ov 2010 uthors! ongBRun 5anga, /iaoB:ong 'hena, anB8o 4in$, anB4u houa In this paper they suggest that 826C9:;"Copula model and applies it to study the risk of foreign exchange portfolio. 3ultivariate Copulas, including 8aussian, tt and Clayton ones, were used to describe a portfolio risk structure, and to extend the analysis from a bivariate to an nndimensional asset allocation problem. $e apply this methodology to study the returns of a portfolio of four ma&or foreign currencies in China, including 1<=, ;16, >?@ and 9(=. %ur results suggest that the optimal investment allocations are similar across different Copulas and confidence levels. In addition, we find that the optimal investment concentrates on the 1<= investment. 8enerally speaking, tt Copula and Clayton Copula better portray the correlation structure of multiple assets than Aormal Copula. C. Li%uidity in the oreign +xchange Market! Measurement, 'ommonality, and Risk remiums, "e#t 201). uthors! Loriano Mancini, ngelo Ranaldo nd9an 5ram#elmeyer In this paper they suggest first systematic study of li!uidity in the foreign exchange market. $e find significant variation in li!uidity across exchange rates, substantial illi!uidity costs, and strong commonality in li!uidity across currencies and with e!uity and bond markets. 2naly#ing the impact of li!uidity risk on carry trades, we show that funding )investment- currencies offer insurance against )exposure to-
li!uidity risk. 2 li!uidity risk factor has a strong impact on carry trade returns from *++B to *++, suggesting that li!uidity risk is priced. $e present evidence that li!uidity spirals may trigger these findings. 10. 3#enness, hedging incentives and foreign exchange ex#osure! firmBlevel multiB country study, 2010 uthors! +laine :utson and "imon "tevenson. In this paper they suggest the benefits of openness to trade are well established, but the disadvantages of openness are less well understood. 2t the firm level trade is the principal source of exposure to exchange rate movements, and exchange exposure can be moderated by a range of hedging techni!ues. In this paper we ask two !uestions. First, do firms in open economies bear higher levels of exchange exposure than those in more closed economiesD
estimate deviations from uncovered interest rate parity conditional on these shocks. he analysis is based on a structural vector autoregression in which monetary policy shocks are identified through the conditional heteroscedasticity of the structural disturbances. 1nlike earlier work in this area, our empirical methodology avoids making arbitrary assumptions about the relevant policy indicator or transmission mechanism in order to achieve identification. 2t the same time, it allows us to assess the implications of imposing invalid identifying restrictions. %ur results indicate that the nominal exchange rate exhibits delayed overshooting in response to a monetary expansion, depreciating for roughly ten months before starting to appreciate. he shock also leads to large and persistent departures from uncovered interest rate parity. "ariancedecomposition results indicate that monetary policy shocks account for a nontrivial proportion of exchange rate fluctuations. 12. oreign +xchange 7rading in +merging 'urrencies! More inancial, More 3ffshore, March 2011. uthors! Ro$ert (. Mc'auley, Michela "catigna In this paper they suggest Foreign exchange turnover evolves in a predictable fashion with increasing income. 2s income per capita rises, currency trading cuts loose from underlying current account transactions. In parallel, an increasing share of trading in the currency takes place outside the home country. 2t given income levels, moreover, currencies with either high or very low yields attract more trading, consistent with their role as target and funding currencies in carry trades. 1). 7he role of im#lied volatility in forecasting future reali-ed volatility and 9um#s in foreign exchange, stock, and $ond markets, 4an 2011 uthors! 7homas 8uscha, , 8ent 4es#er 'hristensen, Morten Erregaard (ielsen. In this paper they suggest that the forecasting of future reali#ed volatility in the foreign exchange, stock, and bond markets from variables in our information set,
including implied volatility backed out from option prices. 6eali#ed volatility is separated into its continuous and &ump components, and the heterogeneous autoregressive )926- model is applied with implied volatility as an additional forecasting variable. 2 vector 926 )"ec926- model for the resulting simultaneous system is introduced, controlling for possible endogeneity issues. $e find that implied volatility contains incremental information about future volatility in all three markets, relative to past continuous and &ump components, and it is an unbiased forecast in the foreign exchange and stock markets. %utofsample forecasting experiments confirm that implied volatility is important in forecasting future reali#ed volatility components in all three markets. ?erhaps surprisingly, the &ump component is, to some extent, predictable, and options appear calibrated to incorporate information about future &umps in all three markets. 1. 7he foreign exchange market! return distri$utions, multifractality, anomalous multifractality and the +##s effect, 3ct 2010. uthors! "tanisFaw DroGdG 4arosFaw Hwa#ieI1, aweF 3Jwi ȩcimka and RafaF Rak. In this paper they suggest a systematic study of various statistical characteristics of highfre!uency returns from the foreign exchange market. his study is based on six exchange rates forming two triangles4 ;16:8?:1<= and 8?:C9F:>?@. It is shown that the exchange rate return fluctuations for all of the pairs considered are well described by the nonextensive statistics in terms of ! 8aussians. here exist some small !uantitative variations in the nonextensivity ! parameter values for different exchange rates )which depend also on the time scales studied-, and this can be related to the importance of a given exchange rate in the world's currency trade. emporal correlations organi#e the series of returns such that they develop the multifractal characteristics for all of the exchange rates, with a
varying degree of symmetry of the singularity spectrum f)G-, however. he most symmetric spectrum is identified for the 8?/1<=. $e also form time series of triangular residual returns and find that the distributions of their fluctuations develop disproportionately heavier tails as compared to small fluctuations, which excludes description in terms of !8aussians. he multifractal characteristics of these residual returns reveal such anomalous properties as negative singularity exponents and even negative singularity spectra.
communicate via cryptographically secure sessions. he first money module receives electronic money from the third money modules of net debit C<2s via the second money modules. $hen all net debit counterparties have paid, the first money module sends the electronic money to the third money modules of net credit C<2s via the second money modules.