Publication detail

Exchange rate comovements, hedging and volatility spillovers on new EU forex markets

Author(s): prof. Ing. Evžen Kočenda M.A., Ph.D., DSc.,
Ing. Michala Moravcová ,
Type: Articles in journals with impact factor
Year: 2019
Number: 0
ISSN / ISBN:
Published in: Journal of International Financial Markets, Institutions & Money, 58(C), 42-64.
Publishing place:
Keywords: Exchange ratesNew EU forex marketsVolatilityDCC modelVolatility spillover indexPortfolio weights and hedge ratiosEU debt crisisGlobal financial crisis
JEL codes: C52, F31, F36, G15, P59
Suggested Citation: Available online
Abstract: We analyze time-varying exchange rate co-movements, hedging ratios, and volatility spillovers on the new EU forex markets during 1999M1-2018M5. We document significant differences in the extent of currency comovements during various periods of market distress that are related to real economic and financial events. These imply favorable diversification benefits: the hedge-ratio calculations show all three currencies bring hedging benefits during crisis periods, but at different costs. During calm periods, most of the volatilities are due to each currency’s own history. During the distress periods, volatility spillovers among currencies increase substantially and the Hungarian currency assumes a leading role.

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