• East Asian Economic Review
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• v.19 no.1
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• pp.3-38
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• 2015

Fama's (1984) volatility relations show that the risk premium in foreign exchange markets is more volatile than, and is negatively correlated with the expected rate of depreciation. This paper studies these relations from the perspective of goods markets frictions. Using a sticky-price general equilibrium model, we show that near-random walk behaviors of both exchange rates and consumption, in response to monetary shocks, can be derived endogenously. Based on this approach, the paper provides quantitative results on Fama's volatility relations.

• International Area Studies Review
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• v.14 no.1
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• pp.55-76
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• 2010

This paper analyses interaction between yen/dollar exchange rates and NIKKEI index using bivariate GJR-GARCH(1,1) model. The data employed for the study is daily data series for the period of Jan. 4, 1995 through Aug. 30, 2009. One of main findings is that market inefficiency appears in the periods of financial crisis. Second, the volatility of exchange rates and stock returns has more increased in the wake of the volatility shock of the previous period during financial crisis than during non-financial crisis. Third, interestingly, the asymmetric volatility shock by bad news in those markets is bigger in financial crisis period than in non financial crisis. Fourth, in the period of current global financial crisis triggered by subprime mortgage crisis in U.S, volatility shock at the previous period is bigger than that of Asian financial crisis that happened in 1997. Lastly, the correlation between both returns of exchange rates and stock prices turns up positive according to the empirical estimation. This result may come from the fact that Japanese stock market does not have much attraction for international financial investment compared to stock markets of neighbouring countries like China, Korea and so on, while real sector's contribution to the economy is considered more importantly.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.19 no.5
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• pp.426-431
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• 2018

This study examines exchange rate volatility spillovers that affect the exchange rate volatility of Korean currency. For this study, the Japanese yen, British pound, Euro, and Canadian dollar are used as the currencies of developed countries, and the Thai baht, Indonesian rupiah, Singapore dollar, and Australian dollar are used as the currencies of the areas near Korea. The GARCH(1.1) model is employed for weekly data covering the period from January 2009 to December 2017. This study finds that the volatility spillovers from the Canadian dollar, Singapore dollar, and Australian dollar to the Korean won are significant, while the volatility spillovers from the Japanese yen, British pound, Euro, Thai baht, and Indonesian rupiah to the Korean won are insignificant. In terms of the economic system and structure, Japan, Britain, and European countries are at a higher level than Korea, while Thailand and Indonesia are at a lower level than Korea. Canada, Singapore, and Australia are almost at the same level as Korea. Therefore, these results appear to be derived from the phenomenon of exchange rate spillovers among countries with a similar economic system and structures, and contradict the literature, which has argued that exchange rates volatility spillovers occur among countries that are in the same area geographically.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.8
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• pp.143-150
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• 2020

This study aims to investigate the effect of oil price and exchange rate on the two Vietnamese stock market indices: VN index and HXN index. This study uses the daily data from August 1^st 2000 to October 25^th 2019 of the two Vietnamese stock indices: VN index and HNX index, the two oil price indices: BRENT and WTI, and the two exchange rates: US dollar to Vietnamese dong and Euro to Vietnamese dong. Due to the presence of heteroskedasticity in our data, we use GARCH (1,1) regression model to perform our analysis. Our findings show that the oil price has a significant positive effect on the two Vietnamese stock market indices. In terms of the stock index volatility, both the VN index and HNX index volatilities are negatively impacted by the return of oil price. While the conclusion about the impact of oil price remained consistent through all three robustness tests, the effect of exchange rate on Vietnamese stock market indices is not consistent. We find thatchanges of the USD/VND exchange rate significantly impact the return and volatility of HNX index only in GARCH (1,1) setting. Our analysis also survives a number of robustness tests.

• Communications of the Korean Mathematical Society
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• v.32 no.2
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• pp.467-477
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• 2017

This paper is about the derivations of local volatilities for European quanto call option prices according to various types of payoffs. We derive the explicit formulas of local volatilities with constant foreign and domestic interest rates by adapting the method of Derman-Kani.

• The Journal of Asian Finance, Economics and Business
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• v.9 no.2
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• pp.37-47
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• 2022

This study uses monthly data from January 2009 to December 2020 to examine the effectiveness of foreign currency intervention and its influence on monetary policy in Vietnam using a Hierarchical Bayesian VAR model. The findings suggest that foreign exchange intervention has little influence on the exchange rate level or exports, but it can significantly minimize exchange rate volatility. As a result, we can demonstrate that the claim that Vietnam is a currency manipulator is false. As well, the forecast error variance decomposition results reveal that interest rate differentials mainly determine the exchange rate level instead of foreign exchange intervention. Moreover, the findings suggest that foreign exchange intervention is not effectively sterilized in Vietnam. Inflation is caused by an increase in international reserves, which leads to an expansion of the money supply and a decrease in interest rates. Although the impact of foreign exchange intervention grows in tandem with the growth of international reserves, if the sterilizing capacity does not improve, rising foreign exchange intervention will instead result in inflation. Finally, we use a rolling window approach to examine the time-varying effect of foreign exchange intervention.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.171-179
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• 2021

In the international markets, financial variables can be volatile and may affect each other, especially in the crisis times. COVID-19, which began in China in 2019 and spread to many countries of the world, created a crisis not only in the global health system but also in the international financial markets and economy. The purpose of this study is to analyze the contagious effect of the COVID-19 pandemic on the volatility of selected financial variables such as Bitcoin, gold, oil price, and exchange rates and the connections between the volatilities of these variables during the pandemic. For this aim, we use the ARMA-EGARCH model to measure the impact of volatility and shocks. In other words, it is aimed to measure whether the impact of the shock on the financial variables of the contagiousness of the epidemic is also transmitted to the markets. The data was collected from secondary and daily data from September 2th 2019 to December 20th, 2020. It can be said that the findings obtained have statistically significant effects on the conditional variability of the variables. Therefore, there are findings that the shocks in the market are contaminated with each other.

• The Journal of Asian Finance, Economics and Business
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• v.2 no.3
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• pp.17-22
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• 2015

This paper examines the effect of impulsiveness of euro on Indian stock market. In order to examine the problem, we select rupee-euro exchange rates and S&P CNX NIFTY and BSE30 SENSEX to represent stock price. We select euro as it considered as second most widely used currency at the international level after dollar. The data are collected a daily basis over a period of 3-Apr-2007 to 30-Mar-2012. The statistical and time series properties of each and every variable have examined using the conventional unit root such as ADF and PP test. Adopting a generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH (EGARCH) model, the study suggests a negative relationship between exchange rate and stock prices in India. Even though India is a major trade partner of European Union, the study couldn't find any significant statistical effect of fluctuations in Euro-rupee exchange rates on stock prices. The study also reveals that shocks to exchange rate have symmetric effect on stock prices and exchange rate fluctuations have permanent effects on stock price volatility in India.

• Journal of Distribution Science
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• v.13 no.2
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• pp.15-24
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• 2015

Purpose - Foreign exchange risk control is in an important component in the international supply chain management. This study shows the importance of the reference period in forecasting future exchange rates with a specific illustration of KIKO currency option contracts, and suggests feasible preventive measures. Research design, data, and methodology - Using monthly Won-Dollar exchange rate data for January 1995~July 2007, I evaluate the statistical characteristics of the exchange rate for two sub-periods; 1) a shorter period after the East Asian financial crisis and 2) a longer period including the financial crisis. The key instrument of analysis is the basic normal distribution theory. Results - The difference in the reference period could lead to an unexpected development in contract implementation and a consequent financial loss. We may avoid foreign exchange loss by using derivatives such as forwards or currency options. Conclusions - We should consider not only level values but also the volatilities of financial variables in making a binding financial contract. Appropriate measures may differ depending on the specific supply chain pattern. We may extend the study with surveys on actual risk measures.

• The Journal of Asian Finance, Economics and Business
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• v.6 no.4
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• pp.45-52
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• 2019

The current study aims to investigate the relationship between tax avoidance and firm risk in an emerging market called Iran. The study population consists of 400 observations and 80 companies listed on the Tehran Stock Exchange (TSE) over a five-year period during 2012 and 2016. The statistical model used in this study is a multivariate regression model; besides, the statistical technique used to test the hypotheses proposed in this research is panel data. The results showed that low effective tax rate (tax avoidance) is more consistent than the higher effective tax rate. Moreover, there is no significant relationship between tax avoidance and future tax rate volatility. The findings also proved that lower effective tax rates are positively associated with future stock price volatility. This implies that since Iranian firms have many financial problems because of economic sanctions, they have a tendency to delay the disclosure of bad news about their firms. Needless to say, when a huge number of negative news reaches its peak, they immediately will enter the market and lead to a remarkable fluctuation in stock prices.