Browsing by Subject "Foreign exchange"
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Item Open Access Commonality in FX liquidity: High-frequency evidence(Elsevier, 2020-06) Şensoy, Ahmet; Uzun, Sevcan; Lucey, B. M.We test the existence and reveal the main properties of commonality in liquidity for the foreign exchange (FX) markets at the high-frequency level. Accordingly, commonality in FX liquidity exists even at the high-frequency level and it has been gradually increasing over the last few years. Moreover, commonality increases significantly before (after) ECB (Fed) monetary policy announcements. Finally, commonality in FX liquidity has a significant positive impact on the commonality in FX return series, indicating that an increase in the intraday systematic liquidity risk might trigger a negative aggregate liquidity-return spiral in the FX markets.Item Open Access Essays on foreign exchange(Bilkent University, 2022-09) Uzun, SevcanThis thesis investigates the foreign exchange market dynamics by using high fre-quency data. There is a vast literature on currency markets. However, we aimed to bring a new light on the foreign exchange market dynamics by investigating high frequency data for a set of mostly traded currencies, that includes both developed and emerging market currencies. In the first chapter, we focus on the commonality in liquidity in the foreign exchange market where we are able to contribute to the literature by using a comprehensive data set (14 currencies) with high frequency analysis. Our findings indicate that commonality in liquidity exist for foreign ex-change markets even beyond crisis periods and also monetary policy meetings of Federal Reserve (FOMC) have significant effect on commonality in liquidity. In the second chapter, we study the foreign exchange market for a large data set (14 currencies) where we analyzed the predictability of jumps in the foreign exchange market. We showed that different machine learning methodologies can be used for jump prediction as well as prediction of the direction of jumps in foreign exchange market where Multi Layer Perceptron (MLP), Support Vector Machine (SVM) and Random Forest methodologies have the highest accuracy rates. In our analysis, we are able to predict the occurrence of jumps as well as the direction of jumps in the foreign exchange market using state of art machine learning methodologies for high frequency data even for the Covid Pandemic period where volatility in the foreign exchange market is very high.Item Open Access Hedging of a multinational firm using futures and options that is subject to price uncertainty due to foreign exchange fluctuations(Bilkent University, 1994) Özmen, Z. MelikeAfter the switch to floating exchange rates in 1973, internationally active companies became exposed to interest and foreign exchange risks. In this thesis, the hedging alternatives due. to foreign currency risk and devaluation are analyzed for a multinational firm whose liabilities from import activity is fixed in terms of foreign currency, but the corresponding domestic price is uncertain. As the main alternative ' fiitures and options ' are examined. Firstly, the related literature is investigated, the required information is given, and the case study is introduced. Under three different scenarios, the possible changes in foreign exchange rates are given. In the first scenario; the possibility of dollar's gaining value, in the second scenario; the possibility of the cross' being the same at expiry, and in the last scenario the possibility of dollar’s loosing value in foreign market are considered. Since the aim is to hedge the potential losses due to changes in cross rates, the company's position is carried in a % 50 US dollar % 50 Deutsche mark basket. This position is analyzed according to the three different scenarios and the profit / loss realized under the alternative hedging strategies are demonstrated. The alternative hedging methods are no hedging, forward with cross, forward with domestic currency unit, and options on futures. It is shown that the alternatives provide perfect hedge but, since the application of the different strategies involves advantages and disadvantages depending on the particular scenario, the decision on which strategy or combination of strategies to use has to be made on the merits of each individual situation.Item Open Access Using weekly empirical probabilities in currency analysis and forecasting(ESC Lille, 2008) Pollock, A. C.; Macaulay, A.; Thomson, M. E.; Önkal D.The Empirical Probability (EP) technique is proposed as an effective support tool to assist agents operating in a global fusion of financial markets. This technique facilitates the identification and prediction of primary, secondary and tertiary trends in addition to the recognition of trend reversals and the detection of changes in trend momentum. The suggested procedure is illustrated by deriving weekly (five-day) non-overlapping estimated probabilities from daily Euro/USD exchange rate data from 04/01/1999 to 31/12/2004 and applying these probabilities to the analysis and forecasting of exchange rate movements. In addition, trend characteristics of the data are used to develop a trading system that not only provides buy and sell indicators but also supplies directional probabilities associated with the signalled actions.