Currency Derivatives: Valuation and Risk Management

Tebogo, Baitshepi

doi:10.2139/ssrn.2043514

Cited by 1 publication

(2 citation statements)

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“…The currency derivatives are used by investors for hedging their foreign exchange rate risk (Tebogo, 2012). Guru (2009) analyzed the forex derivatives market in India.…”

Section: Currency Derivativesmentioning

confidence: 99%

“…Furthermore, some researchers explored the growth and development of the Indian currency futures market and analyzed that there was increased exchange rate volatility of USD-INR during conventional and non-conventional trading hours (Chakravarty and Parveen, 2010). The currency forward market plays a major role in determining foreign exchange spot rates and minimizing the risk associated with it (Srikanth et al, 2012).Currency derivatives are useful to achieve stability in the earnings in foreign exchange market (Tebogo, 2012). Furthermore, Kadyan (2014) analyzed the Indian rupee role as an international currency.…”

Section: Currency Derivativesmentioning

confidence: 99%

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Impact of Currency Futures Issuance on Foreign Exchange Rate Volatility in India

Rani¹,

S²,

Narwal³

2022

OJC

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This article examines the effect of currency futures on foreign exchange rate volatility in India focusing on USD-INR, EUR-INR, GBP-INR and JPY-INR. For the period from February 2002 to February 2020, the daily exchange rate values of all the four currencies against the Indian rupee (INR) were collected. The Augmented Dicky Fuller (ADF) test of the unit root was performed to check the stationarity of the time series data utilized in the study. After verifying the presence of heteroskedasticity with the ARCH LM test, GARCH (1, 1) modelling is employed to assess the impact of the launch of currency futures on the volatility of India's foreign exchange rate. The findings clearly depict that presence of volatility persistence is there for USD-INR, GBP-INR, EUR-INR, and JPY-INR. The volatility of returns of exchange rate before and after currency futures was discovered to be different as it is higher in pre futures period for USD-INR, and GBP-INR whereas for EUR-INR and JPY-INR it is higher in post futures period.The major implication is that when constructing hedging strategies, investors must account for volatility persistence between currency futures and spot markets.

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“…The currency derivatives are used by investors for hedging their foreign exchange rate risk (Tebogo, 2012). Guru (2009) analyzed the forex derivatives market in India.…”

Section: Currency Derivativesmentioning

confidence: 99%

Section: Currency Derivativesmentioning

confidence: 99%