Volatility models of currency futures in developed and emerging markets

This paper examines volatility models of currency futures contracts for three developed markets and two emerging markets. For each contract, standard models of the Unbiased Expectations Hypothesis (UEH) and Cost-of-Carry hypothesis (COC) are extended to derive volatility models corresponding to each...

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Main Authors: SEQUEIRA, J. M., PANG, Chia Chiat, McALEER, Michael
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2004
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5057
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spelling sg-smu-ink.lkcsb_research-60562017-01-26T06:54:06Z Volatility models of currency futures in developed and emerging markets SEQUEIRA, J. M., PANG, Chia Chiat McALEER, Michael This paper examines volatility models of currency futures contracts for three developed markets and two emerging markets. For each contract, standard models of the Unbiased Expectations Hypothesis (UEH) and Cost-of-Carry hypothesis (COC) are extended to derive volatility models corresponding to each of the two standard approaches. Each volatility model is formulated as a system of individual equations for the conditional variances of futures returns, spot returns and the domestic risk-free interest rate. The empirical results suggest that the conditional volatility of futures returns for emerging markets is significant in explaining the conditional volatility of returns in the underlying spot market. For developed markets, however, the conditional volatility of the spot returns is significant in explaining the conditional volatility of futures returns. Moreover, it is found that the domestic risk-free interest rate has little impact on the conditional variances of the futures, spot and domestic risk-free interest rates. 2004-01-05T08:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/5057 info:doi/10.1016/S0378-4754(03)00122-8 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Cost-of-Carry Volatility Systems Unbiased Expectations Hypothesis Volatility System Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Cost-of-Carry Volatility Systems
Unbiased Expectations Hypothesis Volatility System
Finance and Financial Management
spellingShingle Cost-of-Carry Volatility Systems
Unbiased Expectations Hypothesis Volatility System
Finance and Financial Management
SEQUEIRA, J. M.,
PANG, Chia Chiat
McALEER, Michael
Volatility models of currency futures in developed and emerging markets
description This paper examines volatility models of currency futures contracts for three developed markets and two emerging markets. For each contract, standard models of the Unbiased Expectations Hypothesis (UEH) and Cost-of-Carry hypothesis (COC) are extended to derive volatility models corresponding to each of the two standard approaches. Each volatility model is formulated as a system of individual equations for the conditional variances of futures returns, spot returns and the domestic risk-free interest rate. The empirical results suggest that the conditional volatility of futures returns for emerging markets is significant in explaining the conditional volatility of returns in the underlying spot market. For developed markets, however, the conditional volatility of the spot returns is significant in explaining the conditional volatility of futures returns. Moreover, it is found that the domestic risk-free interest rate has little impact on the conditional variances of the futures, spot and domestic risk-free interest rates.
format text
author SEQUEIRA, J. M.,
PANG, Chia Chiat
McALEER, Michael
author_facet SEQUEIRA, J. M.,
PANG, Chia Chiat
McALEER, Michael
author_sort SEQUEIRA, J. M.,
title Volatility models of currency futures in developed and emerging markets
title_short Volatility models of currency futures in developed and emerging markets
title_full Volatility models of currency futures in developed and emerging markets
title_fullStr Volatility models of currency futures in developed and emerging markets
title_full_unstemmed Volatility models of currency futures in developed and emerging markets
title_sort volatility models of currency futures in developed and emerging markets
publisher Institutional Knowledge at Singapore Management University
publishDate 2004
url https://ink.library.smu.edu.sg/lkcsb_research/5057
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