James / Marsh / Sarno | Exchange Rates Handbook | Buch | sack.de

James / Marsh / Sarno Exchange Rates Handbook



1. Auflage 2012, 856 Seiten, Gebunden, HC gerader Rücken kaschiert, Format (B × H): 161 mm x 240 mm, Gewicht: 1431 g Reihe: Wiley Handbooks in Financial Engineering and Econometrics
ISBN: 978-0-470-76883-9
Verlag: John Wiley & Sons


James / Marsh / Sarno Exchange Rates Handbook

Praise for Handbook of Exchange Rates

"This book is remarkable. I expect it to become the anchor reference for people working in the foreign exchange field."

--Richard K. Lyons, Dean and Professor of Finance, Haas School of Business, University of California Berkeley

"It is quite easily the most wide ranging treaty of expertise on the forex market I have ever come across. I will be keeping a copy close to my fingertips."

--Jim O'Neill, Chairman, Goldman Sachs Asset Management

How should we evaluate the forecasting power of models? What are appropriate loss functions for major market participants? Is the exchange rate the only means of adjustment? Handbook of Exchange Rates answers these questions and many more, equipping readers with the relevant concepts and policies for working in today's international economic climate.

Featuring contributions written by leading specialists from the global financial arena, this handbook provides a collection of original ideas on foreign exchange (FX) rates in four succinct sections:

* Overview introduces the history of the FX market and exchange rate regimes, discussing key instruments in the trading environment as well as macro and micro approaches to FX determination.

* Exchange Rate Models and Methods focuses on forecasting exchange rates, featuring methodological contributions on the statistical methods for evaluating forecast performance, parity relationships, fair value models, and flow-based models.

* FX Markets and Products outlines active currency management, currency hedging, hedge accounting; high frequency and algorithmic trading in FX; and FX strategy-based products.

* FX Markets and Policy explores the current policies in place in global markets and presents a framework for analyzing financial crises.

Throughout the book, topics are explored in-depth alongside their founding principles. Each chapter uses real-world examples from the financial industry and concludes with a summary that outlines key points and concepts.

Handbook of Exchange Rates is an essential reference for fund managers and investors as well as practitioners and researchers working in finance, banking, business, and econometrics. The book also serves as a valuable supplement for courses on economics, business, and international finance at the upper-undergraduate and graduate levels.

Weitere Infos & Material


Preface xxiii

Contributors xxvii

part one Overview

1 Foreign Exchange Market Structure, Players, and Evolution 3

1.1 Introduction, 3

1.2 Geography and Composition of Currency Trading, 4

1.3 Players and Information in FX Markets, 11

1.4 Electronic Trading Revolution in FX Markets, 21

1.5 Survey of Multibank FX Platforms, 35

1.6 Summary, 38

Glossary, 39

Acknowledgments, 41

References, 42

2 Macro Approaches to Foreign Exchange Determination 45

2.1 Introduction, 45

2.2 Models of the Nominal Exchange Rate, 46

2.3 Real Models of the Real Exchange Rate, 54

2.4 New Directions in Exchange-Rate Modeling, 60

2.5 Conclusions, 65

Acknowledgments, 65

References, 66

3 Micro Approaches to Foreign Exchange Determination 73

3.1 Introduction, 73

3.2 Perspectives on Spot-Rate Dynamics, 74

3.3 Currency Trading Models and their Implications, 80

3.4 Exchange Rates, Order Flows, and the Macro Economy, 95

3.5 Conclusion, 105

Appendix, 105

3.6 Acknowledgment, 108

References, 108

4 The Exchange Rate in a Behavioral Finance Framework 111

4.1 Introduction, 111

4.2 Exchange Rate Puzzles, 114

4.3 A Prototype Behavioral Model of the Foreign Exchange Market, 122

4.4 Conclusion, 127

References, 129

5 The Evolution of Exchange Rate Regimes and Some Future Perspectives 133

5.1 Introduction, 133

5.2 A Brief History of Currency Regimes, 135

5.3 Performance of the Laisser-Faire Exchange Rate System, 1973-2010, 138

5.4 Trends in Currency Use, 141

5.5 Prospects for the Future, 144

5.6 Concluding Comments, 153

Appendix A: A Formal Test of Hollowing Out, 154

References, 156

part two Exchange Rate Models and Methods

6 Purchasing Power Parity in Economic History 161

6.1 Introduction, 161

6.2 Categorization of Purchasing-Power-Parity Theories, 162

6.3 Historical Application of PPP: Premodern Periods, 163

6.4 Techniques of Testing PPP Theory in Economic-History Literature, 165

6.5 Price Variable in PPP Computations, 168

6.6 Modern Period: Testing of PPP, 169

6.7 Analysis of U.S. Return to Gold Standard in 1879, 177

6.8 Establishment and Assessment of a Fixed Exchange Rate in Interwar Period, 177

6.9 Conclusions, 180

References, 181

7 Purchasing Power Parity in Tradable Goods 189

7.1 Introduction, 189

7.2 The LOP and Price Indices, 190

7.3 Empirical Evidence on the LOP, 194

7.4 Purchasing Power Parity, 200

7.5 Aggregating from the LOP to PPP: What Can We Infer? 205

7.6 Conclusion and Implications, 213

Appendix: TAR Modeling, 214

Acknowledgments, 215

References, 215

8 Statistical and Economic Methods for Evaluating Exchange Rate Predictability 221

8.1 Introduction, 221

8.2 Models for Exchange Rate Predictability, 224

8.3 Statistical Evaluation of Exchange Rate Predictability, 228

8.4 Economic Evaluation of Exchange Rate Predictability, 231

8.5 Combined Forecasts, 235

8.6 Empirical Results, 237

8.7 Conclusion, 256

Appendix A: The Bootstrap Algorithm, 259

Acknowledgments, 260

References, 260

9 When Are Pooled Panel-Data Regression Forecasts of Exchange Rates More Accurate than the Time-Series Regression Forecasts? 265

9.1 Introduction, 265

9.2 Panel Data Exchange Rate Determination Studies, 267

9.3 Asymptotic Consequences of Pooling, 268

9.4 Monte Carlo Study, 272

9.5 An Illustration with Data, 275

9.6 Conclusions, 278

References, 279

10 Carry Trades and Risk 283

10.1 Introduction, 283

10.2 The Carry Trade: Basic Facts, 285

10.3 Pricing the Returns to the Carry Trade, 290

10.4 Empirical Findings, 293

10.5 Time-Varying Risk and Rare Events, 308

10.6 Conclusion, 311

Acknowledgments, 311

References, 311

11 Currency Fair Value Models 313

11.1 Introduction, 313

11.2 Models/Taxonomy, 315

11.3 Implementation Choices and Model Characteristics, 328

11.4 Conclusion, 337

Acknowledgments, 338

References, 339

12 Technical Analysis in the Foreign Exchange Market 343

12.1 Introduction, 343

12.2 The Practice of Technical Analysis, 345

12.3 Studies of Technical Analysis in the Foreign Exchange Market, 350

12.4 Explaining The Success of Technical Analysis, 355

12.5 The Future of Research on Technical Analysis, 366

12.6 Conclusion, 367

Acknowledgments, 368

References, 368

13 Modeling Exchange Rates with Incomplete Information 375

13.1 Introduction, 375

13.2 Basic Monetary Model, 376

13.3 Information Heterogeneity, 379

13.4 Model Uncertainty, 381

13.5 Infrequent Decision Making, 385

13.6 Conclusion, 388

Acknowledgments, 388

References, 389

14 Exchange Rates in a Stochastic Discount Factor Framework 391

14.1 Introduction, 391

14.2 Exchange Rates and Stochastic Discount Factors, 392

14.3 Empirical Evidence, 398

14.4 Models, 407

14.5 Conclusion, 417

References, 417

15 Volatility and Correlation Timing in Active Currency Management 421

15.1 Introduction, 421

15.2 Dynamic Models for Volatility and Correlation, 424

15.3 The Economic Value of Volatility and Correlation Timing, 428

15.4 Parameter Uncertainty in Bayesian Asset Allocation, 430

15.5 Model Uncertainty, 431

15.6 Empirical Results, 432

15.7 Conclusion, 440

Appendix A: Univariate Models for Volatility Timing, 442

Appendix B: Parameter Uncertainty and the Predictive Density, 443

Acknowledgments, 444

References, 444

part three FX Markets and Products

16 Active Currency Management Part I: Is There a Premium for Currency Investing (Beta) 453

16.1 Introduction, 453

16.2 Beta in the Foreign Exchange Markets, 455

16.3 Multiple Forms of FX Beta, 465

16.4 Carry FX Indices from Banks, 465

16.5 Trend-Following FX Indices from Banks, 467

16.6 Conclusion, 468

References, 469

17 Active Currency Management Part II: Is There Skill or Alpha in Currency Investing? 471

17.1 Introduction, 471

17.2 Alternative Currency Management Mandates, 473

17.3 Benchmarks for Currency Fund Management, 477

17.4 Empirical Evidence with the Barclay Currency Traders Index and Individual Fund Managers, 481

17.5 Empirical Evidence: Fund Managers on the DB FX Select Platform, 496

17.6 Conclusions and Investment Implications, 498

References, 499

18 Currency Hedging for International Bond and Equity Investors 503

18.1 Introduction, 503

18.2 Overview of Empirical Hedging Studies, 504

18.3 Return and Volatility Impact of Currency Hedging, 506

18.4 Hedge Instruments--Currency Forwards versus Options, 526

18.5 Managing Tracking Error in Forward Hedges, 533

18.6 Conclusions, 541

References, 543

19 FX Reserve Management 545

19.1 FX Reserve Management, 545

19.2 FX Reserve Uses, 545

19.3 FX Reserve Sources, 546

19.4 Objectives of Reserves Management, 547

19.5 Techniques of Reserve Management, 547

19.6 Historical Perspective, 548

19.7 What Assets Do Central Banks Hold? 549

19.8 Constraints, 550

19.9 External Managers, 551

19.10 Costs of Accumulation and Holding of Reserves, 551

19.11 Diversification, 552

19.12 Challenges to Diversification and Size of Reserves, 552

19.13 Changing Role of the Dollar as the International Reserve Currency, 554

19.14 Reserve Management if the Dollar is Replaced as the Reserve Currency, 557

19.15 Conclusion, 559

Acknowledgments, 559

References, 559

20 High Frequency Finance: Using Scaling Laws to Build Trading Models 563

20.1 Introduction, 563

20.2 The Intrinsic Time Framework, 565

20.3 Scaling Laws, 567

20.4 The Scale of Market Quakes, 574

20.5 Trading Models, 577

20.6 Conclusion, 582

Acknowledgments, 582

References, 582

21 Algorithmic Execution in Foreign Exchange 585

21.1 Introduction, 585

21.2 Key Components of an Algorithmic Execution Framework, 589

21.3 Types of Algorithms, 592

21.4 What Execution Strategies are Most Effective? 595

21.5 Looking Forward, 596

Appendix A, 596

References, 597

22 Foreign Exchange Strategy Based Products 599

22.1 Introduction, 599

22.2 Evolution of the Foreign Exchange Market, 600

22.3 Foreign Exchange Investable Indices and Strategy-Based Products, 606

22.4 Conclusion, 620

References, 620

23 Foreign Exchange Futures, Forwards, and Swaps 623

23.1 Introduction, 623

23.2 Market Basics and Size, 625

23.3 Dislocations of the FX and Cross-Currency Swap Markets under Financial Crises, 637

23.4 Conclusion, 643

Acknowledgments, 643

References, 643

24 FX Options and Volatility Derivatives: An Overview from the Buy-Side

Perspective 647

24.1 Introduction, 647

24.2 Why Would One Bother with an Option? 648

24.3 Market for FX Options, 655

24.4 Volatility, 660

24.5 FX Options from the Buy-Side Perspective, 683

Acknowledgment, 695

References, 695

part four FX Markets and Policy

25 A Common Framework for Thinking about Currency Crises 699

25.1 Introduction, 699

25.2 The KFG Model, 701

25.3 Extensions, 706

25.4 Empirical Work, 713

25.5 Conclusion, 714

References, 715

26 Official Intervention in the Foreign Exchange Market 717

26.1 Introduction, 717

26.2 Official FX Interventions and Reserve Accumulation: Stylized Facts, Motives, and Effects, 721

26.3 Empirical Evidence on the Effectiveness of Official FX Interventions, 725

26.4 Conclusions, 746

26.5 Acknowledgements, 746

References, 747

27 Exchange Rate Misalignment--The Case of the Chinese Renminbi 751

27.1 Introduction, 751

27.2 Background, 752

27.3 Undervalued or Overvalued, 754

27.4 Concluding Remarks, 762

Acknowledgments, 763

References, 763

28 Choosing an Exchange Rate Regime 767

28.1 Five Advantages of Fixed Exchange Rates , 768

28.2 Econometric Evidence on the Bilateral Trade Effects of Currency Regimes, 770

28.3 Five Advantages of Floating Exchange Rates, 775

28.4 How to Weigh Up the Advantages of Fixing Versus Floating, 777

28.5 Country Characteristics That Should Help Determine the Choice of Regime, 778

28.6 Alternative Nominal Anchors, 780

References, 781

Index 785


Sarno
JESSICA JAMES, PhD, is a Managing Director and Co-Head of the Quantitative Solution Team at Commerzbank in London, where she is responsible for FX client risk advisory. She has published on the topics of credit derivatives and total return swaps and is the coauthor of Interest Rate Modelling (Wiley).

IAN W. MARSH, PhD, is Professor of Finance in the Cass Business School at City University London. Dr. Marsh has extensive consulting experience with companies including JPMorgan Chase, Morley Fund Managment, and the Royal Bank of Scotland. He currently focuses his research on credit risk transfer markets and the foreign exchange market.

LUCIO SARNO, PhD, is Associate Dean, Head of Faculty, and Professor of Finance in the Cass Business School at City University London. Dr. Sarno has extensive industry experience in consulting and trading foreign exchange for several major asset management companies and has contributed to policy, training, and research for the International Monetary Fund, the European Central Bank, and the World Bank.

Marsh, Ian
IAN W. MARSH, PhD, is Professor of Finance in the Cass Business School at City University London. Dr. Marsh has extensive consulting experience with companies including JPMorgan Chase, Morley Fund Managment, and the Royal Bank of Scotland. He currently focuses his research on credit risk transfer markets and the foreign exchange market.

James, Jessica
JESSICA JAMES, PhD, is a Managing Director and Co-Head of the Quantitative Solution Team at Commerzbank in London, where she is responsible for FX client risk advisory. She has published on the topics of credit derivatives and total return swaps and is the coauthor of Interest Rate Modelling (Wiley).

Sarno, Lucio
LUCIO SARNO, PhD, is Associate Dean, Head of Faculty, and Professor of Finance in the Cass Business School at City University London. Dr. Sarno has extensive industry experience in consulting and trading foreign exchange for several major asset management companies and has contributed to policy, training, and research for the International Monetary Fund, the European Central Bank, and the World Bank.



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