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This study compares the hedging effectiveness of domestic won/dollar futures and foreign non-deferable forward (NDF) contracts. We use an ex ante analysis based on out-of-sample data. In addition, the analysis is based on the inventory hedging scenario, adopted in most of previous studies. We estimated hedge ratios by using the various method of 1 : 1 hedging, ordinary least squares (OLS), and error correction model (ECM). The hedging period is expanded to include one to twelve months‘ In every aspect, the hedging effectiveness of won/dollar futures contract turns out to be better than that of NDF contract. However, the differences are not statistically significant at 10% level. This res비t stems from the fact that there exists a high correlation between spot exchange rate and futures or forward exchange rates, implying an evidence of co-movement between them.

The 2007 BIS Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity Report shows a substantial increase in turnover in foreign exchange and OTC derivatives markets. Turnover in traditional FX markets increased to reach $3.2 trillion. The largest contributor to this 71% increase between April 2004 and April 2007 occurred in FX swaps. It was like a prelude to the financial crisis of 2007–2008 driven by transactions carried out between banks and other financial institutions due to the significance of hedge funds and major engagement of emerging market currencies which have sought new configurations of portfolio diversification worldwide.

The authors make assessment on RMB valuation and to contribute to the fierce debate on this important issue, which is perceived to have a great effect on the improvement or deterioration in trade balance. A triangular analysis approach is put forward and empirical assessment is made. The paper aims to discuss these issues.

A triangular analysis approach based on no arbitrage conditions for three currencies, and causality and influence analysis.

First, it has been found that the movements in the RMB dollar exchange rate do influence the dollar euro exchange rate and the former do have a causality effect on the latter, in both the long run and the short term. Second, it is implied that the RMB is overvalued vis-à-vis the US dollar, as the analysis suggests that an overvalued euro vis-à-vis the US dollar would imply a kind of overvaluation of the RMB vis-à-vis the US dollar, and by any conventional measures the euro has appeared to be overvalued vis-à-vis the US dollar, especially in the months before the last financial crisis.

First, the peg of the RMB to the US dollar that undervalues the RMB vis-à-vis the US dollar will not help promote China's overall trade balance or export even if undervaluation of currencies can ever help improve nations' terms of trade. Second, no stability in RMB exchange rates can be claimed by pegging the RMB to the US dollar, as the exchange rate of the RMB vis-à-vis currencies other than the US dollar would be as volatile as that between the US dollar and the euro and other convertible currencies.

A new triangular analysis approach in international finance research. First, there is an advantage to adopt this seemingly simple analytical framework: it is highly reliable; no triangular arbitrage conditions have to be met even under exchange controls, whilst PPP may not hold even with flexible exchange rate regimes. Second, it does away with the thinking confined to small open economies that has dominated academic research for so long and is totally inapplicable to the RMB case.

Using a discrete-time version of the arbitrage-free Nelson–Siegel (AFNS) term structure model, the authors examine how yield curves in the US and China react to exchange rate policy shocks as China introduces gradual reforms to make its exchange rate regime more flexible. The paper aims to discuss this issue.

The authors characterize the specification of the discrete-time AFNS model, prove the uniqueness of the solution for model identification, perform specification analysis on its canonical form and detail the MCMC estimation method with a fast and reliable prior extraction step.

Model decomposition reveals that in the US yield responses, changes in risk premia for medium- to long-term yields dominate changes in yield expectation for short- to medium-term yields, indicating that the portfolio rebalancing effect due to varying risk perception is stronger than the signaling effect due to policy rate expectation.

The results are helpful in diagnosing market sentiment and exchange rate risk pricing as China further internationalizes its currency.

The methodology can be easily extended to study yield curve responses to other scenarios of policy shocks or regime changes.

The concept of volatility transmission and co-movement has witnessed a resurgence in the international finance literature in recent years after the black swan events which gave evidence of financial market linkages. The purpose of this paper is to examine the dynamic sources of volatility transmission in the foreign exchange market in recent financial market integration in Africa.

A conceptual framework was adapted from the extant literature and was used as the basis of modeling exchange rate volatility transmission. This paper adopts a quantitative research approach and opts for augmented DCC model to empirically unearth the sources of exchange rate volatility transmission.

The key findings of the study are that, the African market is more prone to shock from outside than in the region. Macroeconomic news surprises influence volatility transmission and co-movements. Robust support is found for trade balance, interest rate and gross domestic product. These findings clearly demonstrate the low level of financial development and challenges that sometimes exist in exchange rate-policy implementation by policy makers.

Interested academics and practitioners working in the area might incorporate bilateral investment into the model of exchange rate correlation in future research.

Unilaterally considering exchange rate volatility transmission and subsequent augmentation of the DCC model, this study makes a modest contribution to the examination of exchange rate correlations in Africa. This study makes an important contribution in not only addressing this imbalance, but more importantly improving the relative literature on exchange rate volatility transmission.

This study is to examine the three theme of the eπiciency of Korea foreign exchange market including the unbiasedness testing, the relative efficiency estimates, and the information spillover efficiency. Data using the analysis 81’e won-dollar spot and futures in domestic and won-dollar forward in offshore. i.e.. New York and Singapore NDF (non-delivery forward).

The empirical results are summarized as follows: First. the efficient market or unbiasedness expectations hypothesis is not rejected in the won-dollar currency futures market apart from offshore New York and Singapore NDF markets. This indicates that the won-dollar futures price is likely to be an accurate indicator of future won-dollar spot prices without the trader having to pay a risk premium for the privilege of trading the contract. Second. the findings suggest the domestic won-dollar futures market is 13.58% efficient. the Singapore offshore won-dollar NDF market is 11.38% efficient. and the New York offshore won-dollar NDF market is 2.68% efficient. This indicates that the domestic won-dollar futures market is more efficient than the offshore won-dollar NDF market. It is therefore possible to conclude that the domestic currency futures price is a relatively successful predictor of the future spot price. Third. the findings suggest the information spillover exists between domestic won-dollar spot/futures market and offshore won-dollar New York NDF market in both direction. This indicates that the two markets are efficiently linked.

The paper's aim is to report and comment on two preliminary issues that arose from claims being pursued by the Financial Services Compensation Scheme (FSCS) against Abbey National Treasury Services (ANTS) and NDF Administration Ltd (NDF).

The paper outlines the facts and explains the decision.

The FSCS commenced action against ANTS as assignee of the assigned claims and alleged that ANTS had collaborated with NDF in product development and promotion of the Structured Capital at Risk Products and was liable in negligence and misrepresentation to the investors whose claims it held as assignee. Having considered the arguments, the Judge concluded that FSA did have power to make rules enabling FSCS to take assignment of investor claims.

The issues in this case go to the heart of the funding mechanism of the FSCS. The financing of such compensation schemes is a perennially controversial issue in every jurisdiction that has them.

The purpose of this paper is to assess life cycle costing (LCC) of the equipment in a more realistic, precise, and applicable manner, and to apply it to a real industrial problem.

Based on the failure rates of the components of a machine, the LCC is assessed, mathematically modeled, and incorporated to the parallel machine replacement problem with capacity expansion consideration. The problem is modeled as mixed integer programming which intends to minimize the total costs incurred during a planning horizon of several periods for the machines of the same type with different ages. The decision variables are the number of machines to be purchased/salvaged in each period. A genetic algorithm (GA) is developed for solving the problem and its efficiency is verified.

In conventional models presented for calculation of LCC, corrective maintenance (CM) costs of the machines are incorporated to the model as a whole which may result in inaccurate calculations. Obtaining this value is also very difficult and it can be different for machines with different ages. By calculating the CM costs of a machine based on the failure rates of its components, the LCC can be properly estimated in a realistic and precise manner. The presented GA is also proven to be efficient for solving problems of almost any size with different number of machines, components, and planning periods.

The presented model and GA are applied to a real case of a construction company that needs to determine a purchase/salvage schedule for its loaders in the next ten years. Results of the calculated schedule imply that employing new loaders rather than maintaining the aged ones generally results in the minimum LCC.

This paper presents a novel approach for precise, meaningful, and practical LCC calculation. The mathematical model and its solving method can be utilized by both the manufacturers and buyers of equipment as a tool which determines a parallel machine purchase/salvage schedule for a planning horizon of several periods which incurs minimum overall cost. The presented material can be also applied to other industrial problems and cases.