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The national objectives of forward exchange controls are to restrain speculation in foreign exchange, to limit international capital flows and to affect the forward exchange rates. Restrictions on forward transactions are economic welfare costs for enterprises and banks, which are analysed in terms of risk‐return and supply‐demand theory. Empirical answers to whether forward exchange control is really necessary await collection and disclosure of company currency exposure, which itself may contribute to the national objectives implicit in forward exchange controls.

It is widely recognized that expectations of future events have significant impact on exchange rates movements. The role of expectations in exchange rate movements can be considered as a source of exchange rate estimation error. In a sense it is a pity that the majority of empirical evidence on the exchange rate fluctuation clearly negates the validity of such models that are more sophisticated and comprehensive.

Recent research indicates that the random walk hypothesis (RWH) approximately describes the behavior of major dollar exchange rates during the post‐1973 float. The present analysis seeks to examine the profitability of currency futures trading rules that assume that spot exchange rates can be adequately modeled as a driftless random walk.

Two random walk currency futures trading rules are simulated over all available data from the period 1984‐2003. In both cases, the investor buys currencies selling at a discount and sells those selling at a premium, as the RWH implies. The two rules differ only in the way they allocate the hypothetical investor's resources among long and short foreign currency positions.

Results show that an investor who used these trading strategies over the past decade would have enjoyed large cumulative gains, although periods of profit were interrupted by periods of substantial loss.

The findings encourage the hope that profitable random‐walk‐based strategies for currency futures trading can be devised. The simulation results have important implications for those willing to hedge, borrowers, and speculators.

This paper provides evidence that purchasing futures contracts on currencies priced at a discount and selling futures contracts priced at a premium has generally been a profitable trading strategy during the last two decades of floating exchange rates.

The purpose of this paper is to examine the price discovery and volatility spillovers in spot and futures prices of four currencies (namely, USD/INR, EURO/INR, GBP/INR and JPY/INR) and between futures prices of both stock exchanges namely, Multi-Commodity Stock Exchange (MCX-SX) and National Stock Exchange (NSE) in India.

The study applies cointegration test of Johansen’s along with VECM to investigate the price discovery. GARCH-BEKK model is used to examine the volatility spillover between spot and futures and between futures prices. The other two models namely, constant conditional correlation and dynamic conditional correlation are used to demonstrate the constant and time-varying correlations. In order to confirm the volatility spillover results, the study also applies test of directional spillovers suggested by Diebold and Yilmaz (2009, 2012).

The results of the study show that there is long-term equilibrium relationship between spot and futures and between futures markets. Between futures and spot prices, futures price appears to lead the spot price in the short-run. Volatility spillover results indicate that the movement of volatility spillover takes place from futures to spot in the short-run while spot to futures found in the long-run. However, the results of between futures markets exhibit the dominance of MCX-SX over NSE in terms of volatility spillovers. By and large, the findings of the study indicate the important role of futures market in price discovery as well as volatility spillovers in India’s currency market.

The results highlight the role of futures market in the information transmission process as it appears to assimilate new information quicker than spot market. Hence, policymakers in emerging markets such as India should focus on the development of necessary institutional and fiscal architecture, as well as regulatory reforms, so that the currency market trading platforms can achieve greater liquidity and efficiency.

Due to recent development of currency futures market, there is dearth of literature on this subject. With the apparent importance of currency market in recent time, this study attempts to study the efficient behavior of currency market by way of examining the price discovery and volatility spillovers between spot and futures and between futures prices of four currencies traded on two platforms. The study has strong implications for India’s stock market especially at the time when its currency is under great strain owing to the adverse impact of global financial crisis.

When the time comes to make a European acquisition or divestiture, you will be relieved to have this step‐by‐step guide to valuing a multinational business on hand. This article, written from the point of view of a finance executive, is adapted from Valuation: Measuring and Managing the Value of Companies.

The development of China's foreign exchange market and the reform of Chinese yuan (hereinafter “CNY”) exchange rate are closely linked with each other. Their respective journey through the past 70 years can both be divided into three historical periods; as follows: China's foreign exchange market underwent a difficult exploration period, a formation and development period and an innovative development period; in the meanwhile, the formation mechanism of CNY exchange rate also witnessed three periods marked successively by a single exchange rate system with administrative pricing, an explorative formation mechanism of CNY exchange rate and a reformed, marketized CNY exchange rate mechanism.

In the present world, the development of almost every country is closely linked to the international community, which is the result of the heterogeneity in system, market, humanity and history, in addition to the differences in natural resource endowments and the diversity in technology, administration, information, experience and diplomacy. International economic exchanges require foreign exchange, which gives rise to the existence and development of the foreign exchange market.

The 70-year history of China's foreign exchange market has proven the need to continue safeguarding national sovereignty and interests of the people, stick to the general direction of serving economic development, adhere to the strategy of steadily and orderly promoting the construction of the foreign exchange market, keep on making innovation in monetary policy operation and unbendingly stay away from any systemic financial risks.

During the 70-year history of the new China, as an indispensable economic resource in China's economic development, the foreign exchange mechanism bolstered each stage of economic development and was always an important manifestation of China's economic sovereignty. It is argued that during the 30-year planned economy that preceded reform and opening-up, China pursued a closed-door policy with few international economic exchanges. The subtext of such argument is that China did not have (or hardly had much of) a foreign exchange mechanism during this period, which is clearly in conflict with historical evidence. In fact, although China did not have an open foreign exchange market before the reform and opening-up, it had a clear foreign exchange management system and exchange rate system.

The purpose of this paper is to study the lead-lag relationship between the futures and spot foreign exchange (FX) market in India to understand the price discovery mechanism and the relationship between these two markets.

The estimation of lead-lag relationship is realized in three steps. First unit root and stationarity tests (Augmented Dickey-Fuller, Phillips-Perron, and Kwiatkowski-Phillips-Schmidt-Shin) are applied to check the stationarity of the data. Second, cointegration tests (Engle and Granger’s residual based approach and Johansen’s cointegration test) are applied to determine long run relationship between the markets. Third, error correction estimation is carried out by applying Vector Error Correction Model (VECM) to determine the leading market.

The study finds that there is a long run relationship between the futures and spot market where the futures market has emerged as the leading market for the four currencies studied in the paper.

Majorly, the studies on Indian FX market limit themselves to identifying the efficiency of the market and the studies which talk about the lead-lag relationship focus on the Indian stock market. This paper enhances the existing literature on Indian FX market by exploring the less explored subject of the lead-lag relationship between futures and spot FX market in India.

The purpose of this paper is to present the essential role that currency order flow plays in the foreign exchange markets of emerging economies in the determination of their currencies in the short and the long-run against major currencies of the world, which cannot be over emphasized, most especially against the US dollar. Insomuch that, if some of these emerging economies can be successfully transmitted into full development, it would be a good model for other emerging economies and the world at large.

A hybrid model (portfolio shift model) proposed by Evans and Lyons (2002a, 2002b) is extended to analyze a data set of every quarter of an hour currency order flow and currency exchange rate fluctuations of Thai Baht (THB) against the US$ for the period of six years (January 2010 to December 2015). To reflect the pressure of currency excess demand, the authors construct a measure of currency order flow in the Thailand currency exchange market. Vector autoregression model is applied to estimate the effectual role of currency order flow in the determination of exchange rate for the THB against the US$.

Currency order flow indeed accounted for a sizeable and significant portion of the fluctuations in the THB and the US$ exchange rate.

Insomuch that, the results show that currency order flow has significant explanatory power in the emerging markets economy to capture the THB exchange rate variability, and it then brings to the attention of the Thailand Monetary Authority the importance that should be attached to the market microstructure.

This study explores the nature of the spot foreign exchange risk premium. Employing Ross's Arbitrage Pricing Theory (APT) as a vehicle, it tests the hypothesis that cross‐sectional differences in pure currency returns depend on measures of systematic (covariance) risk. These tests have greater power, in the sense of an enhanced ability to reject the hypothesis, since they explicitly allow for the possibility that idiosyncratic risk is priced. A battery of tests is unable to reject the hypothesis that expected exchange returns can be explained by a single‐factor APT. One implication of these results is that official intervention in exchange markets is unnecessary and undesirable.