Measuring Efficiency of South American Foreign Exchange Derivatives Market in Minimizing Currency Risk
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.
Copyright (c) 2019 Editorial Assistant; RAAD MOZIB LALON
This work is licensed under a Creative Commons Attribution 4.0 International License.
Thus, work submitted to Journal of Management and Research implies that it is original, unpublished work of the authors; neither published previously nor accepted/under consideration for publication elsewhere.