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Foreign exchange market

About: Foreign exchange market is a research topic. Over the lifetime, 6661 publications have been published within this topic receiving 153384 citations. The topic is also known as: forex & FX.


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TL;DR: The authors analyzed three views of the relationship between the exchange rate and financial fragility: (1) the moral hazard hypothesis, according to which pegged exchange rates offer implicit insurance against exchange risk and thereby encourage reckless borrowing and lending; (2) the original sin hypothesis, which emphasizes an incompleteness in financial markets which prevents the domestic currency from being used to borrow abroad or to borrow long term even domestically; and (3) the commitment problem hypothesis, who sees financial crises as resulting from neither moral hazard nor original sin but from the weakness of the institutions that address commitment problems.
Abstract: In this paper we analyze three views of the relationship between the exchange rate and financial fragility: (1) the moral hazard hypothesis, according to which pegged exchange rates offer implicit insurance against exchange risk and thereby encourage reckless borrowing and lending; (2) the original sin hypothesis, which emphasizes an incompleteness in financial markets which prevents the domestic currency from being used to borrow abroad or to borrow long term even domestically; and (3) the commitment problem hypothesis, which sees financial crises as resulting from neither moral hazard nor original sin but from the weakness of the institutions that address commitment problems. We examine the evidence on these hypotheses and draw out their implications for exchange-rate policy in emerging markets.

167 citations

Journal ArticleDOI
TL;DR: A new hybrid intelligent method to forecast financial time series, especially for the Foreign Exchange Market (FX), which uses both historical market data and chart patterns to forecast market trends.
Abstract: To be successful in financial market trading it is necessary to correctly predict future market trends. Most professional traders use technical analysis to forecast future market prices. In this paper, we present a new hybrid intelligent method to forecast financial time series, especially for the Foreign Exchange Market (FX). To emulate the way real traders make predictions, this method uses both historical market data and chart patterns to forecast market trends. First, wavelet full decomposition of time series analysis was used as an Adaptive Network-based Fuzzy Inference System (ANFIS) input data for forecasting future market prices. Also, Quantum-behaved Particle Swarm Optimization (QPSO) for tuning the ANFIS membership functions has been used. The second part of this paper proposes a novel hybrid Dynamic Time Warping (DTW)-Wavelet Transform (WT) method for automatic pattern extraction. The results indicate that the presented hybrid method is a very useful and effective one for financial price forecasting and financial pattern extraction.

167 citations

Journal ArticleDOI
TL;DR: In this article, a two country inter-temporal asset pricing model is developed which implies that central bank foreign exchange intervention affects the forward exchange risk premium, and empirical support is found for the theoretical model with intervention influencing the risk premium in the forward market.

165 citations

Journal ArticleDOI
TL;DR: In this paper, the impact of bank internationalization on domestic market power (Lerner index) and risk for German banks was analyzed. And the analysis showed that higher market power is associated with lower risk.
Abstract: We analyze the impact of bank internationalization on domestic market power (Lerner index) and risk for German banks. Risk is measured by the official declaration of regulatory authorities that a bank is distressed. We distinguish the volume of foreign assets, the number of foreign countries, and different modes of foreign entry. Our analysis has three main results. First, higher market power is associated with lower risk. Second, holding assets in many countries reduce market power at home, but banks with a higher share of foreign assets exhibit higher market power. Third, bank internationalization is only weakly related to bank risk.

164 citations

Book
02 Apr 2006
TL;DR: De Grauwe and Grimaldi as discussed by the authors provided an alternative view of the workings of foreign exchange markets based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past.
Abstract: This book provides an alternative view of the workings of foreign exchange markets The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model It explains why large exchange-rate changes and volatility clustering occur It also has important implications for understanding how the news affects the exchange rate De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever The authors also use their model to analyze the effects of official interventions in the foreign exchange market They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics

164 citations


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Performance
Metrics
No. of papers in the topic in previous years
YearPapers
2023158
2022202
2021157
2020171
2019209
2018198