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An Over the Counter Approach to the FOREX Market

An Over the Counter Approach to the FOREX Market

The model delivers closed form solutions for the dealers’ bid and ask prices, and allows us to study how the spread is affected both by market microstructure (e.g., dealer availability and agents’ bargaining positions), and by macroeconomic fundamentals (e.g., inflation). We find that the spread is negatively related to dealer availability. A lower ex ante likelihood of con- tacting a dealer discourages agents from carrying large amounts of real home money balances (which is costly), thus, making them more liquidity constrained and increasing their marginal benefit from consuming foreign goods. As a result, these agents are willing to give up more units of home currency in exchange for one unit of foreign currency, which allows dealers to extract higher fees. Since the ease with which agents can contact a dealer is typically interpreted as a measure of market liquidity, this result implies that bid-ask spreads will be tighter in more liquid markets, a finding which is well-established both in the theoretical and the empirical fi- nance literature (e.g., see DGP and the references therein). However, the channel through which this result emerges in our framework is quite different. For instance, in DGP, a higher probabil- ity of contacting a dealer effectively increases the agent’s bargaining power (and tightens the spread) by making access to alternative trading partners easier. In our paper, a higher probabil- ity of contacting a dealer effectively increases the agent’s bargaining power by making her less liquidity constraint, and, thus, less eager to acquire foreign currency in the FOREX market.

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Testing the Efficient Market Hypothesis in an Emerging Market: Evidence from Forex Market in Mauritius

Testing the Efficient Market Hypothesis in an Emerging Market: Evidence from Forex Market in Mauritius

DOI: 10.4236/tel.2017.77143 2106 Theoretical Economics Letters managers need to rethink about their buying and selling recommendations in forex. In fact, Foreign Exchange Reserves in Mauritius increased to 5262.10 USD Million in June from 5158 USD Million in June of 2017. Mauritian Foreign Ex- change Reserves averaged 2295.92USD Million from 1999 until 2017, reaching a high of 5262.62 USD Million in May of 2017 and a record low of 637.50 USD Million in October of 2000. In the long-term, the Mauritius Foreign Exchange Reserves is projected to trend around 4935.22 USD Million in 2020.Foreign Ex- change Reserves in Mauritius is reported by the Bank of Mauritius. Hence, this study considers the case of the Mauritian forex market namely EUR/MUR, USD/ MUR, GBP/MUR, JPY/MUR and AUD/MUR over a time frame of 5 years rang- ing from 2012 to 2016 as they are more actively traded. The importance here is to understand the main theories of market efficiency related to foreign exchange and how it is applicable and predictable in Mauritius. Therefore, the technique used for analysis is concentrated on the use of Augmented-Fuller Test and Phil- ips Peron Test to examine the existence of a weak form market efficiency in Mauritian forex. Secondly, the semi-strong form market efficiency is also tested by using the Granger causality test.

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An Analysis of the Co-movement of Price Change Volatility in Forex Market

An Analysis of the Co-movement of Price Change Volatility in Forex Market

The data, which are used for analyzing in this research are exported from a Forex trading platform called Meta Trader 4 (MT4) of FXCM [22]. We select the most traded pairs of currencies called the Majors. They perform the largest share of the Forex market, approximately 85 percent [23] and therefore they exhibit high market liquidity. The selected currencies are: EUR, USD, JPY, GBP, CHF, NZD and CAD. Therefore, the dataset consists of totally 28

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GLOBAL FOREX MARKET VIS-A-VIS INDIAN CURRENCY– A STUDY

GLOBAL FOREX MARKET VIS-A-VIS INDIAN CURRENCY– A STUDY

India is a world most largely trading country it plays a major role in forex trading with global currencies. Currency Trading is the world's largest market consisting of almost trillion in daily volumes and as investors learn more and become more interested, the market continues to rapidly grow. Not only is the forex market the largest market in the world, but it is also the most liquid, differentiating it from the other markets. The present paper derives different global currencies fluctuations and its impact on Indian forex market.

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Survey on Content Digging of News-features for FOREX Market Forecast

Survey on Content Digging of News-features for FOREX Market Forecast

a) Multilayer Dimens ion Reduction Algorith m: The algorith m tackles a different root cause of the problem at each layer. The first layer is termed the Semantic Abstraction Layer and addresses the problem of co -re ference in te xt mining that is contributing to sparsity. Co-refe rence occurs when two or more words in a text corpus refer to the same concept. This work produces a custom approach by the name of Heuristic-Hyperny ms Modeling wh ich creates a way to recognize words with the same parent- word to be regarded as one entity. As a result, prediction accuracy increases significantly at this layer which is attributed to appropriate noise-reduction from the feature-space. The second layer is termed Sentiment Integration Layer, which integrates sentiment analysis capability into the algorithm by proposing a sentiment weight by the name of Su mScore that reflects investor’s sentiment. This layer reduces the dimensions by eliminating those that are of zero va lue in terms of sentiment and thereby improves prediction accuracy. The third layer encompasses a dynamic mode l creation algorithm, termed Synchronous Targeted Feature Reduction (STFR). It is suitable for the challenge at hand whereby the mining of a strea m of te xt is concerned. It updates the models with the most recent informat ion available and, more impo rtantly, it ensures that the dimensions are reduced to a numb er that is many times smaller. The algorith m and each of its layers are extensively evaluated using real market data and news content across multip le years and have proven to be solid and superior to any other comparable solution. On top of a well-rounded multifaceted algorith m, this work contributes a much needed research framewo rk for this context with a test-bed of data that must make future research endeavours more convenient. The produced algorithm is scalable and its modular design allo ws improve ment in each of its layers [9].

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Arbitrage, Covered Interest Parity and Cointegration Analysis on the NTD/USD Forex Market Revisited

Arbitrage, Covered Interest Parity and Cointegration Analysis on the NTD/USD Forex Market Revisited

This paper attempts to divide samples period in two subperiods including Pre- and post-crisis periods and the March 2008 presidential election in Taiwan as the cutoff point, the changing dynamics of the relations among China, Taiwan, and the USA. From Table 1, in 180-day market, the average returns on borrowing NTD, and covered arbitrage by deposit in USD appear negative. The average rate of return pre and pro Financial Crisis Timeline are shown as 41.32% and 53.46%, respectively, more arbitrage opportunities arise. Meanwhile, the remaining 30-, 60-, 90- days there are tiny arbitrage opportunities appearance, or even negligible before or after global financial crisis. The rate of 180-day return is greater than 30-, 60-, 90-day returns so that the long-term exists greater probability of arbitrage opportunities than the short- term, as similar findings to Taylor (1989) results. The longer term interest rates exhibit more risk than short-term interest rates, and those risk premium also increases. The CIP theory seems to hold due to the results in the lower profit opportunities. Similar conclusions were discovered by Fletcher and Taylor (1996) based on data concerning long-term contracts. Transaction costs prevent arbitrage when deviations from parity are small.

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“TECHNICAL ANALYSIS OF INDIAN FOREX MARKET”

“TECHNICAL ANALYSIS OF INDIAN FOREX MARKET”

Foreign Exchange Market is a free Market, where prices of currencies are determined on the basis of demand and supply. This market does not have any geographical restriction. Buying and selling in currencies becomes very easy now-a-days by automated trading system. Technical and Fundamental analysis are two basic techniques used by trades to forecast the anticipated price movement followed by taking position in order to earn profits. Moving Average method is more often used by traders to confirm the indicator of move but MACD and RSI can also provide trend and momentum to predict the next move. In the present study, the author has attempted to examine the trend and trend reversal in the exchange rates of USDINR and have tried to assess the major indicators of forecasting for making buying and selling strategies.

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Forex forecasting by using NGARCH model

Forex forecasting by using NGARCH model

Due to the fact that Forex forecasting is of practical as well as theoretical importance, a large number of methods and techniques (including linear and nonlinear) were introduced to beat random walk model in Forex market. With increasing development of time series forecasting, researchers and investors are hoping that the mysteries of the Forex market can be solve. In last two decades, extensive research has been carried out on the returns of time series data Generalized Autoregressive Conditional Heteroscedastic (GARCH) models. Many previous studies have been discussed for FOREX forecasting.

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Azar (2014) assessed the martingale behaviour of the Lebanese pound against the Australian dollar, Canadian dollar, Swiss franc, Euro, British pound and Japanese yen from January 4, 2010 to January 31, 2014 using the VR test. The study provided support for MDH. Almudhaf (2014) investigated the randomness of currencies of CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) relative to the US dollar using weekly data from February 2, 2007 to April 13, 2012. The results of the VR tests indicated the forex rates of all the countries follow a random walk except Vietnam and Egypt. Rasekhi and Shahrazi (2014) tested for the weak- form efficiency of the Iranian forex market under fixed and managed float exchange rate regimes. The results showed that the market is more efficient in the managed float exchange regime. Katusiime, Shamsuddin and Agbola (2015) investigated the efficiency of the Ugandan forex market from January 1994 to June 2012 using a battery of variance ratio tests. It found that the market is not weak-form efficient. Salisu et al. (2015) examined the MDH in currencies of 9 countries in the Asia-Pacific region against the Euro on weekly basis from April 1, 2005 to September 12, 2014. Utilising the wild bootstrap automatic VR test and wild bootstrap generalized spectral test, the results showed that all the currencies aligned to MDH over the whole period. However, after accounting for structural break, the results revealed that the South Korean won rejected MDH prior to its break date while the Chinese yuan did not support the MDH after its break date. Salisu and Ayinde (2016) tested for MDH in South Africa and Nigeria using the weekly data of their currencies relative to euro, dollar and pound sterling between December 14, 2001 and September 26, 2014. The study found that the forex market of South Africa is more efficient than the Nigerian forex market.

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Front Running and Collusion in Forex Trading

Front Running and Collusion in Forex Trading

Foreign currency (Forex) trading appears to take place in a highly competitive environment. Since the mid-1990s, major currencies have traded almost continuously between large numbers of counter- parties on multiple electronic platforms in high volumes and with very tight bid-ask spreads. How- ever, in recent years, government regulators and enforcement authorities across the globe undertook investigations into whether many of the world’s largest dealer-banks were acting anti-competitively in the Forex market. Between 2014 and 2015 reports issued by the U.S. Department of Justice, the Commodity Futures Trading Commission, New York Department of Financial Services, the U.K. Financial Conduct Authority, and the Swiss Financial Market Supervisory Authority all concluded that dealer-banks engaged in a range of collusive conduct aimed at manipulating the Forex bench- marks, specifically the ECB and WMR Fixes. 1

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Central Bank Intervention in Foreign Exchange Market under Managed Float: A Three Regime Threshold VAR Analysis of Indian Rupee US Dollar Exchange Rate

Central Bank Intervention in Foreign Exchange Market under Managed Float: A Three Regime Threshold VAR Analysis of Indian Rupee US Dollar Exchange Rate

Such understanding of the functioning of RBI coupled with limited public information of the RBI’s forex market interventions has generated a plethora of literature examining the role of RBI in addressing volatility of exchange rate. However, the results are again mixed – some find RBI has been successful in reducing the volatility (Baig et al, 2003; Behera et al. 2008) while others find the opposite (Goyal et al, 2012; Inoue, 2015). Analyses of different time periods coupled with different time series models may end up with these types of conflicting results. Now, it is highly probable that RBI does try to contain the exchange rate within a band which itself is not fixed but adjusts over time according to expectations and RBI intervenes only when the exchange rate approaches an alarming zone (either towards the upper band or towards the lower band) and it does not intervene when the exchange rate is

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FACTORS AFFECTING FOREX TRANSACTION PERFORMANCE OF ETHIOPIAN PRIVATE BANKS

FACTORS AFFECTING FOREX TRANSACTION PERFORMANCE OF ETHIOPIAN PRIVATE BANKS

As clearly observed in the Introduction part of this paper, the foreign exchange performance of banks can be directly related with the amount total capital that the banks have. The total capita of the bank shows how wider the bank can do business and operate widely; it can show the ability of the bank to engage in the international as well as domestic business. Which in turn can imply the extent to which the bank is dealing with the foreign currency. Secondly the number of branches of the bank can have a very important role for the bank to perform well or not in the Forex market, that means the more the bank has the branch its foreign exchange performance will probably increase. Thirty, in Ethiopian practical case and according to researches done, in average 60% of the total branches of the banks are found in the capital city, where most of the countries business deal is made. Therefore it will better to measure the relationship or impact of the branch distribution of each bank with that of its performance. And finally, while measuring the impact of a performance by any means it is very important to look in to the experience of these banks, through the years of their establishment.

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Rupee Depreciation: Its Causes and Cure

Rupee Depreciation: Its Causes and Cure

in the graph, the rise is relentless. Coupled with this steep rise in the supply of rupees, recently the demand for rupee amongst the international investors is also falling because the Indian economy is struggling. Indian government has created lot of ‘regime uncertainty’ (Higgs, Spring 1997) e.g., they have tried to retrospectively tax foreign companies, the GAAR issue, the on-going Vodafone and Nokia tax issues and myriad of other policy backtrackings etc., and because of that foreign institutional investors are reluctant in investing in India. On the other side, there was a talk of the US Fed starting to taper its money printing program called QE (Quantitative Easing), which increased the demand for dollars in the Forex market vis-à-vis Indian rupee. All these factors combined to depreciate the rupee sharply against the US dollar.

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FOREX Web-Based Trading Platform with E-Learning Features

FOREX Web-Based Trading Platform with E-Learning Features

There has been an influx of traders and researchers eager to gain a better understanding of the market due to the rapid growth of the FOREX market. Traders with varying degree of experience are also often inundated with information, analysis methods as well as trading rules when making a trading decision on buying/selling a currency exchange pair. Thus, this paper reviews the current computational tools and analysis methods used within the FOREX trading community and proposes the development of a web-based trading platform with e-learning features to support beginners. Novice traders could also benefit from the use of the proposed e-learning trading platform as it helps them gain valuable knowledge and navigate the FOREX market in real-time. Even experienced traders would find it useful as the platform could be used for actual trading and acts as a reference point to understand the reasoning behind the certain technical analysis implementation that are still unclear to them.

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Within and Cross Volatility Contagion Effects among Stock, Crude and Forex Returns: Empirical Evidence from Five Emerging Economies

Within and Cross Volatility Contagion Effects among Stock, Crude and Forex Returns: Empirical Evidence from Five Emerging Economies

If the price returns and their volatilities thereof of these three variables, namely, WTI crude oil returns, corresponding stock market as well as forex re- turns are dynamically interrelated, then a random shock in the price return of any one of these variables will soon get reflected in the price returns and the re- turn volatility of the other two variables as a result of an underlying relationship called as “spillover effect”. In most cases, the fluctuations in the prices of these macroeconomic variables are determined by the domestic as well as the global market forces leading to randomness in the underlying returns. This random- ness in returns is popularly understood through the returns volatility which is otherwise known as returns with heteroscedastic variance. This volatility in- duced through a random shock may then persist over a longer period of time resulting in volatility clustering; a phenomenon wherein, a period of high re- turns is consequently followed by subsequent periods of higher returns and a pe- riod of low returns is consequently followed by subsequent periods of lower re- turns. With increasing global integration and unrestricted flow of capital across borders, shocks in financial markets tend to spread across other financial mar- kets within and across national boundaries.

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FULL Capital Account Convertibility:India's Readiness in the context of Financial Integration

FULL Capital Account Convertibility:India's Readiness in the context of Financial Integration

• If domestic interest rate is lower than the global level, in presence of FCAC the residents would convert the currency and invest in assets or currencies abroad. This would not only cause a “domestic capital flight”, but also would deplete domestic saving. The Savings-Investment gap would widen. Also, as the demand for currency conversion rises, the domestic currency loses its value and depreciates. In a strongly import-sensitive country (particularly an oil-importer), depreciation of its domestic currency would widen the trade deficit, since cost of imports increases. Simultaneously, inflationary pressure increases, and the government has to resort to contractionary monetary policy instruments like open- market operations, increasing the reserve requirements of banks etc which impede long-term growth prospects.

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Forex Trading Robot with Technical and Fundamental Analysis

Forex Trading Robot with Technical and Fundamental Analysis

Compare with other investment instrument, online forex trading has become very popular in the past decade because it offers traders several advantages. Forex offers high (even unlimited) return on investment. It can be started with a relatively small amount of capital, but a trader can buy or sell up to 500 times more funds than he actually has. This can be happened when a trader employ leverage. Leverage is an important weapon in the armoury of Forex benefits. This way one can easily gener-ate more substantial gains (or losses) even without having a large capital at disposal. Forex is the most liquid market in the world. There always be a constant supply and demand for money and the market is open 24 hours a day, 5 days a week. This means that traders do not have to adjust schedule for the market opening hours, as the traders can trade all day long, anywhere at anytime.

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A Research on Factors of Forex Procedures in Private Bank

A Research on Factors of Forex Procedures in Private Bank

Yazid, A. S., and Muda, M. S. (2006). Mentioned that monetary disaster happened on 1997 September to 1998 August, many Malaysian multinationals suffered badly for result of fluctuations in FOREX. Thus, overseas danger administration has appeared in the emerging market Malaysian multinational it considers the cause of risk managing and length of management manipulate and foreign trade danger management of documentation. Finding shows that the mass multinationals concentrated on administration things and routine reporting on spin off activities. The top management takes care on the financial losses associated with by- product trading .

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Study of Relation among the Bullion, Forex, and
Stock market in India

Study of Relation among the Bullion, Forex, and Stock market in India

In this paper five years data of capital market, Forex, and Bullion market have been taken and analyzed using SPSS version 10 and the results obtained explains the relationship amongst Sensex, Forex, and Bullion markets. In this analysis the default Eigen 'rule' was applied. Thus, only components with an Eigen value > 1 were extracted. There was no rotation. Because a reduced number of components are extracted the communalities are less than 1.

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Foreign currency lending

Foreign currency lending

Our results thus far highlight an important competitive disadvantage of firms borrowing in a currency different than their lender’s currency, which persists in a number of sensitivity tests and is stronger for firms in developed countries but with relatively low levels of credit provided by banks, as well as when lenders have higher market power. Naturally, these findings raise the question of whether the affected borrowers can do something to lower the extra cost of credit (that is besides being sound firms with profitable projects). In what follows, we focus on two potential strategies: the first considers forming ties between firms and banks via repeated lending (relationship lending); and the second considers the conditions of the particular loan contract and the loan syndicate’s structure.

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