Exchange market pressure (EMP) measures the pressure on a currency to depreciate. It adds to the actual depreciation a weighted combination of policy instruments used to ward off depreciation, such as interest rates and foreign exchange interventions, where the weights are their effectiveness. The key difficulty in the literature is how to identify these weights. We exploit the persistence of p...

In this work we extend a well-known model from arrested physical systems, and employ it in order to efficiently depict different currency pairs of foreign exchange market price fluctuation distributions. We consider the exchange rate price in the time range between 2010 and 2016 at yearly time intervals and resolved at one minute frequency. We then fit the experimental datasets with this model,...

I show that the US dollar earns a safety premium versus a basket of foreign currencies and that this premium is particularly high in times of global financial stress. These findings support the view that the dollar acts as the reserve currency for the international monetary system and that it is a natural safe haven in times of crisis, when a global flight to quality toward the reserve currency...

Power spectrum densities for the number of tick quotes per minute (market activity) on three currency markets (USD/JPY, EUR/USD, and JPY/EUR) for periods from January 1999 to December 2000 are analyzed. We find some peaks on the power spectrum densities at a few minutes. We develop the double-threshold agent model and confirm that stochastic resonance occurs for the market activity of this mode...

This study empirically examines the effect of foreign exchange (FX) market liquidity risk and volatility on the excess returns of currency carry trades. In contrast to the existent literature, we construct an alternative proxy of liquidity risk violations of no arbitrage bounds in the forward and currency swap markets. We also use volatility smile data to capture FX-market specific volatility. ...

This paper investigates artificial neural networks prediction modeling of foreign currency rates using Levenberg Marquardt (LM) learning algorithms. The models were trained from historical data using US Dollar (USD) currency rates against Indonesian Rupiah (IDR). The forecasting performance of the models was evaluated using a number of statistical measurements and compared. The results show tha...

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This paper presents evidence that the bid-ask spreads in euro rates increased relative to the corresponding bid-ask spreads in the German mark (DM) prior to the creation of the currency union. This comes with a decrease in transaction volume in the euro rates relative to the previous DM rates. The starkest example is the DM(euro)/yen rate in which the spread has risen by almost two-thirds while...