Open AccessContagion in Futures FOREX Markets for the Post- Global Financial Crisis: A Multivariate FIGARCHcDCC Approach
Author(s) -
Konstantinos Tsiaras
Publication year - 2020
Publication title -
journal of quantitative methods
Language(s) - English
Resource type - Journals
eISSN - 2522-2260
pISSN - 2522-2252
DOI - 10.29145/2020/jqm/040102
Subject(s) - foreign exchange market , futures contract , autoregressive conditional heteroskedasticity , economics , financial economics , financial crisis , financial market , futures market , foreign exchange , monetary economics , finance , macroeconomics , volatility (finance)
This paper seeks to investigate the time-varying conditional correlations to the futures FOREX market returns. We employ a dynamic conditional correlation (DCC) Generalized ARCH (GARCH) model to find potential contagion effects among the markets. The under investigation period is 2014-2019. We focus on four major futures FOREX markets namely JPY/USD, KRW/USD, EUR/USD and INR/USD. The empirical results show an increase in conditional correlation or contagion for all the pairsof future FOREX markets. Based on the dynamic conditional correlations, KRW/USD seems to be the safest futures FOREX market. The results are of interest to policymakers who provide regulations for the futures FOREX markets.
JEL Classification Codes: C58, C61, G11, G15