Handbook of Exchange Rates

by James, Jessica; Marsh, Ian; Sarno, Lucio

• ISBN13: 9780470768839
• ISBN10: 0470768835
• Edition: 1st
• Format: Hardcover
• Copyright: 2012-07-03
• Publisher: Wiley

Summary

Handbook of Exchange Rates is an impressive compilation of research from more than thirty-five leading researchers and experts on the topic. The book is clearly organized into five succinct sections that explore the foreign exchange (FX) market, from its background and economic foundation to current practices, obstacles, and policies in the modern foreign exchange market. Part I presents an overview of the history of the FX market and exchange rate regimes, the key instruments/players in the FX trading environment, and both macro and micro approaches to FX determination. Next, Part II focuses on forecasting exchange rates, featuring methodological contributions on the sstatistical methods for evaluating forecast performance, parity relationships, fair value models, and flow-based models. Part III treats FX as an asset class, outlining active currency management, currency hedging, hedge accounting, high frequency and algorithmic trading in FX, and FX strategy-based products. Part IV discusses products and pricing in FX, the FX options market, and volatility derivatives. Finally, the book concludes with a section on FX markets and policy, prediction and management of FX crises, FX regimes and policy; regulation in FX market that also features discussion of the effects of exchange rate regime choice on international trade. Each chapter follows the same easy-to-follow format. Following an introduction, a description of theory is presented along with key formulae. Next, the discussed theory is applied to a real data set and accompanied with illustrative descriptions. Exercises and real-world examples from the finance industry are spread throughout each chapter, and a summary provides a brief overview of main points and concepts.

Author Biography

JESSICA JAMES, PhD, is a Managing Director and Co-Head of the Quantitative Solution Team at Commerzbank in London, where she is responsible for FX client risk advisory. She has published on the topics of credit derivatives and total return swaps and is the coauthor of Interest Rate Modelling (Wiley).

IAN W. MARSH, PhD, is Professor of Finance in the Cass Business School at City University London. Dr. Marsh has extensive consulting experience with companies including JPMorgan Chase, Morley Fund Managment, and the Royal Bank of Scotland. He currently focuses his research on credit risk transfer markets and the foreign exchange market.

LUCIO SARNO, PhD, is Associate Dean, Head of Faculty, and Professor of Finance in the Cass Business School at City University London. Dr. Sarno has extensive industry experience in consulting and trading foreign exchange for several major asset management companies and has contributed to policy, training, and research for the International Monetary Fund, the European Central Bank, and the World Bank.

Table of Contents

Overview
Foreign Exchange Market Structure, Players and Evolution	p. 1
Macro Approaches to Foreign Exchange Determination	p. 49
Micro Approaches to Foreign Exchange Determination	p. 79
The Exchange Rate in a Behavioural Finance Framework	p. 119
The Evolution of Exchange Rate Regimes and Some Future Perspective	p. 145
. Exchange Rate Models and Methods
Purchasing Power Parity in Economic History	p. 175
Purchasing Power Parity in Tradable Goods	p. 203
Statistical and Economic Methods for Evaluating Exchange Rate Predictability	p. 239
When Are Pooled Panel-Data Regression Forecasts of Exchange Rates More Accurate than the Time-Series Regression Forecasts?	p. 283
Carry Trades and Risk	p. 301
Currency Fair Value Models	p. 335
Technical Analysis in the Foreign Exchange Market	p. 369
Modeling Exchange Rates with Incomplete Information	p. 403
Exchange Rates in a Stochastic Discount Factor Framework	p. 421
Volatility and Correlation Timing in Active Currency Management	p. 453
. FX Markets and Products
Is There a Premium for Currency Investing (Beta)	p. 485
Is There Skill or Alpha in Currency Investing?	p. 509
Currency Hedging for International Bond and Equity Investors	p. 539
FX Reserve Management	p. 577
High frequency finance: Using scaling laws to build trading models	p. 597
Algorithmic Execution in Foreign Exchange	p. 621
Foreign Exchange Strategy Based Products	p. 635
Foreign exchange futures, forwards and swaps	p. 661
Options and Volatility Derivatives	p. 687
FX Markets and Policy
A Common Framework for Thinking about Currency Crises	p. 741
Official Intervention in the Foreign Exchange Market	p. 763
Exchange Rate Misalignment - The Case of the Chinese Renminbi	p. 797
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