Browsing by Subject "Volume-volatility nexus"

Now showing 1 - 2 of 2

Open Access
Essays in empirical finance
(2019-12) Serdengeçti, Süleyman
This thesis comprise three essays that investigate foreign exchange market volatility and its dynamics using high frequency exchange rate data. In the first essay, we decompose the jump component of USDTRY exchange rate volatility and investigate association of jump frequencies and sizes with portfolio ows, carry trade activity and proxies for heterogeneous expectations derived from foreign exchange rate forecasts, currency options and forecasts for key macro-economic variables. The findings of the essay show that portfolio ows, particularly bond ows significantly reduce size and frequency of jumps. Moreover, we observe significant increases in jump size and frequencies with increasing dispersion in beliefs in future exchange rate level and CPI. In the second essay, we study the dynamics of return and liquidity jumps for USDMXN, USDTRY and USDZAR exchange rates. The findings of the essay show that the duration between consecutive return jump arrivals are significantly reduced by average liquidity level in the same period. Furthermore, arrival rates of both liquidity and return jumps are significantly affected by market-wide risk and liquidity factors and key macroeconomic news releases. In the third essay, we investigate the trading volume and volatility nexus for USDTRY exchange rate by using local banks' foreign exchange transaction volume data. In this context, foreign currency denominated spot, forward and swap transactions in with local and foreign customers and between each other for intraday realized volatility of different trading sessions. The findings of this study reveal that positive contemporaneous relationship between trading volume and volatility is evident for local customers and in local trading sessions. Moreover, dispersion in expectations for future foreign exchange rate strengthens this relationship.
Open Access
Intraday volume-volatility nexus in the FX markets: evidence from an emerging market
(Elsevier, 2019) Şensoy, Ahmet; Serdengeçti, S.
Using a dataset on local banks' daily FX transaction volume segregated into counterparty and transaction types, this article investigates the relationship between trading volume and intraday realized volatility for the US dollar/Turkish lira parity (USDTRY), one of the most traded emerging market currencies against US dollar. We question whether type of counterparty and transaction affects intraday volume-volatility relationship across various trading sessions around the world. We reveal that only the spot transactions of domestic customers have positive contemporaneous relation with realized volatility and this significance is valid only in global trading sessions that mostly overlap with the local trading hours. Furthermore, we utilize a metric for the belief dispersion on the level of future exchange rate via currency options and find that the dispersion significantly strengthens the volume-volatility nexus, confirming the Dispersion of Beliefs Hypothesis.