Measuring Efficiency of South American Foreign Exchange Derivatives Market in Minimizing Currency Risk

  • RAAD MOZIB LALON University of Dhaka
Keywords: Volatility, FX Derivatives, NER, Openness, PPP, BIS, GDP

Abstract

This paper attempts to reveal whether the foreign exchange (FX) derivatives market effectively and efficiently reduces the volatility to foreign exchange rate fiuctuations. Cross-country evidence suggests that development ofthe FXderivatives market does not boost up spot exchange rate volatility and reduces aggregate exposure to currency risk. Intraday evidence for Chile shows that activity in the forward market has not been associated with higher volatility in the exchange rate following the adoption ofa fioating exchange rate regime. The study also found no evidence that net positions of large participants in the FX derivatives market help to predict the exchange rate. These findings support the view that development of the FX derivatives market is valuable to reduce aggregate currency risk.

Author Biography

RAAD MOZIB LALON, University of Dhaka

Department of Banking & Insurance,Lecturer

Published
2019-12-02
How to Cite
LALON, R. (2019). Measuring Efficiency of South American Foreign Exchange Derivatives Market in Minimizing Currency Risk. Journal of Management and Research, 2(1), 1-10. https://doi.org/10.29145/jmr/21/0201001