arXiv research

We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving portfolios in multiple currencies $\mathbf{V}$ are time-consistent when (and only…

Study assesses impact of CBDC on financial stability in dual-currency economy.

Emerging economies use countercyclical policies to manage crises and dominant currencies.

ETF approval boosts Bitcoin's correlation with equities, stabilizes with gold, and maintains negative correlation with fiat currencies.

The so called "globalization" process (i.e. the inexorable integration of markets, currencies, nation-states, technologies and the intensification of consciousness of the world as a whole) has a behavior exactly equivalent to a system that is tending to a maximum entropy state. This globalization process obeys a collec…

This paper empirically analyses risk in the Euro relative to other currencies. Comparisons are made between a sub period encompassing the final transitional stage to full monetary union with a sub period prior to this. Stability in the face of speculative attack is examined using Extreme Value Theory to obtain estimate…

Study applies market microstructure to Cuban informal currency market, finding market makers improve liquidity.

Study examines USD exchange rate dynamics using Kramers-Moyal expansion.

Unfulfilled expectations from macro-economic initiatives during the Great Recession and the massive shift into globalization echo today with political upheaval, anti-establishment propaganda, and looming trade/currency wars that threaten domestic and international value chains. Once stable entities like the EU now look…

Algorithmic stablecoins optimize monetary policy to balance price stability.

The paper reveals the hidden costs of digitizing commodity money and proposes a new stable-coin system.

Debt-financed collateral in DeFi increases stability risks.

In this paper, simple mathematical models from Control Theory are applied to three very important economic paradigms, namely (a) minimum wages in self-regulating markets, (b) market-versus-true values and currency rates, and (c) government spending and taxation levels. Analytical solutions are provided in all three par…

The multi dimensional string objects are introduced as a new alternative for an application of string models for time series forecasting in trading on financial markets. The objects are represented by open string with 2-endpoints and D2-brane, which are continuous enhancement of 1-endpoint open string model. We show ho…

This paper investigates - on the basis of the Cont-Bouchaud model - whether a Tobin tax can stabilize foreign exchange markets. Compared to earlier studies, this paper explicitly recognizes that a transaction tax-induced reduction in market depth may increase the price responsiveness of a given order. We find that the …

We present a simplistic model of the competition between different currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a different currency. We show that competition between currencies does not necessarily converge to…

By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countri…

Paper examines pricing and hedging for cross-currency swaps referencing backward-looking rates.

Bitcoins have emerged as a possible competitor to usual currencies, but other crypto-currencies have likewise appeared as competitors to the Bitcoin currency. The expanding market of crypto-currencies now involves capital equivalent to $10^{10}$ US Dollars, providing academia with an unusual opportunity to study the em…

Our study proposes a new currency system to protect wealth from over-issued fiat and stablecoins.

Survey of stablecoins to reduce cryptocurrency volatility.

Abstract framework for cross-currency interest rate contracts.

Brazil proposes a new BRICS trade currency to dominate international trade.

Unified framework for complex financial networks using lattice theory.

World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign exchange rates within the basket of 60 currencies in the period December 1998 -- M…

Develops a new model for cross-currency derivatives pricing.

A large set of daily FOREX time series is analyzed. The corresponding correlation matrices (CM) are constructed for USD, EUR and PLZ used as the base currencies. The triangle rule is interpreted as constraints reducing the number of independent returns. The CM spectrum is computed and compared with the cases of shuffle…

We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group together all the exchange rates with a common base currency and study each group separa…

New digital currency aims for equal wealth distribution.

Hybrid method reveals true currency correlations.

Study on collateral currency impact in differential swaps valuation.

It is well known that traded foreign exchange forwards and cross currency swaps (CCS) cannot be priced applying overnight cash and carry arguments as they imply absence of funding advantage of one currency to the other. This paper proposes a heuristic present value concept for multi-currency pricing and hedging which a…

The study reveals the hierarchical structure of the international FOREX market using currency fluctuation distribution similarities.

In this paper an econophysics model for the currency exchange operations with commission is proposed. With this purpose some analogies and similarities of the processes that take place in the frame of the electrochemical system made from electrodes sunk into a solution of electrolytes and the process of the currency ex…

Gold and currency markets form a unique pair with specific interactions and dynamics. We focus on the efficiency ranking of gold markets with respect to the currency of purchase. By utilizing the Efficiency Index (EI) based on fractal dimension, approximate entropy and long-term memory on a wide portfolio of 142 gold p…

For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there is a time delay of order less than a minute between two currency markets having a…

We develop the first basic Operational Risk perspective on key risk management issues associated with the development of new forms of electronic currency in the real economy. In particular, we focus on understanding the development of new risks types and the evolution of current risk types as new components of financia…

Digital currencies and cryptocurrencies have hesitantly started to penetrate the investors, and the next step will be the regulatory risk management framework. We examine the Value-at-Risk and Expected Shortfall properties for the major digital currencies, Bitcoin, Ethereum, Litecoin, and Ripple. The methodology used i…

Study shows variance gamma model outperforms Black-Scholes for USD-INR currency options.

This paper investigates and compares currency substitution between the currencies of Central and Eastern European (CEE) countries and the euro. In addition, we develop a model with microeconomic foundations, which identifies difference between currency substitution and money demand sensitivity to exchange rate variatio…

Automated market-making for CBDCs and stable coins on blockchain.

We generalize the results of Bielecki and Rutkowski (2015) on funding and collateralization to a multi-currency framework and link their results with those of Piterbarg (2012), Moreni and Pallavicini (2017), and Fujii et al. (2010b). In doing this, we provide a complete study of absence of arbitrage in a multi-currency…

This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we find that arbitrage operations when four currencies are present may appear periodic in nature, and not involve smooth convergence to a "balanced" ensemble of exc…

We suggest an intermediate currency approach that allows us to price options on all FX markets simultaneously under the same risk-neutral measure which ensures consistency of FX option prices across all markets. In particular, it is sufficient to calibrate a model to the volatility smile on the domestic market as, due …

Currency volatility shocks predict lower excess returns, and buying weak transmitters outperforms selling strong ones.

We studied the topology of correlation networks among 34 major currencies using the concept of a minimal spanning tree and hierarchical tree for the full years of 2007-2008 when major economic turbulence occurred. We used the USD (US Dollar) and the TL (Turkish Lira) as numeraires in which the USD was the major currenc…

Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the mark…

Oil prices affect Russian banks' stability, with negative impacts from decreases.