Journal: Journal of International Money and Finance

Abbreviation

J. int. money financ.

Publisher

Elsevier

Journal Volumes

ISSN

0261-5606
1873-0639

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Publications 1 - 10 of 16
  • The impact of option hedging on the spot market volatility
    Item type: Journal Article
    Anderegg, Benjamin; Uhlmann, Florian; Sornette, Didier (2022)
    Journal of International Money and Finance
    We theoretically model and empirically quantify the feedback effect of delta hedging for the spot market volatility of the forex market. We start from an economy with two types of traders, an aggregated option market maker (OMM) and an aggregated option market taker (OMT), whose exposures reflect the total outstanding positions of all option traders in the market. A different hedge ratio of the OMM and OMT leads to a net delta hedge activity, which introduces market friction. We represent this friction by a simple linear permanent impact model. This approach allows us to derive the dependence of the spot market volatility on the gamma exposure of the traders. Our theoretical model shows that the spot market volatility is increased (decreased) by a negative (positive) gamma exposure of the OMM, whereby the amount of the increase depends on the net delta hedge amount executed in the spot market. To empirically test this model, we first reconstruct the aggregated OMM's gamma exposure by using trade repository data and find that it is negative. The empirical analysis performed over the period from 21st October 2017 to 30th June 2018 using our reconstructed OMM data then strongly supports our theoretical model: The gamma exposure of the OMM turns out to be highly significant for the spot market volatility and, as expected, the spot market volatility is increased with the OMM's short gamma exposure. Quantitatively, a negative gamma exposure of the OMM of approximately −1000 billion USD (which is around what we observe from our reconstructed OMM data) leads to an absolute increase in volatility of 0.7% in EURUSD and 0.9% in USDJPY.
  • How is real convergence driving nominal convergence in the new EU Member States?
    Item type: Journal Article
    Lein, Sarah M.; León-Ledesma, Miguel A.; Nerlich, Carolin (2008)
    Journal of International Money and Finance
  • How similar are country- and sector-responses to common shocks within the euro area?
    Item type: Journal Article
    Rathke, Alexander; Streicher, Sina; Sturm, Jan-Egbert (2020)
    Journal of International Money and Finance
    Ever since the introduction of the Euro, there have been discussions about whether Europe constitutes an optimal currency area. The Great Recession and the European debt crisis have rekindled and intensified this debate. Heterogeneous country experiences have led to questioning the rationale for a common monetary policy in the absence of a common fiscal framework to cushion macroeconomic shocks. In this paper, we examine whether the impact of typical macroeconomic shocks at the European Monetary Union (EMU) level varies across countries and sectors. We follow Furlanetto et al. (2017) and estimate common euro area macroeconomic supply, demand, monetary, investment, and financial shocks using sign restrictions. We calculate the impulse responses to these shocks at the country-sector level using local linear projections and propose a measure for business cycle synchronisation based on the similarity of the responses. We find varying degrees of heterogeneity across member countries' responses to common EMU shocks. Although the responses of economic sectors are themselves heterogeneous, different sector-decompositions across countries cannot explain the cross-country heterogeneity. Contrary to e.g. Bayoumi and Eichengreen (1993, 2017), we identify Italy to be a core country. In line with recent literature, the level of heterogeneity was the most pronounced during the financial crisis compared to pre- and post-crisis periods.
  • Quantitative modelling of the EUR/CHF exchange rate during the target zone regime of September 2011 to January 2015
    Item type: Journal Article
    Lera, Sandro C.; Sornette, Didier (2016)
    Journal of International Money and Finance
  • Zooming out: The trade effect of the euro in historical perspective
    Item type: Journal Article
    Berger, Helge; Nitsch, Volker (2008)
    Journal of International Money and Finance
  • Quantification of the high level of endogeneity and of structural regime shifts in commodity markets
    Item type: Journal Article
    Filimonov, Vladimir; Bicchetti, David; Maystre, Nicolas; et al. (2014)
    Journal of International Money and Finance
  • On the distribution of exchange rate regime treatment effects on international trade
    Item type: Journal Article
    Dorn, Sabrina; Egger, Peter (2015)
    Journal of International Money and Finance
  • Employment adjustment and financial tightness – Evidence from firm-level dat
    Item type: Journal Article
    Bäurle, Gregor; Lein, Sarah M.; Steiner, Elizabeth (2021)
    Journal of International Money and Finance
    Firms tend to only partially adjust their workforce to changes in output. Typically, labour is hoarded in downturns; subsequently, firms have to hire less workers in upturns, but they can do so only if they can bear the current costs of keeping superfluous workers so that the firms can save rehiring costs in the future. Therefore, labour hoarding can be seen as an investment and may be influenced by factors, such as the firms’ financial shortages, that tend to impede investments. Using Swiss firm-level data, we show that for firms in financially strained situations, the sensitivity of employment to fluctuations in output increases considerably. When output changes, financially tighter firms resize their labour force more than firms that have abundant funding. Both limited internal funding opportunities as well as the reduced access to external finance are important. The strongest impact, however, is observed when internal and external financial tightness occur jointly. In that case, compared to firms that are not in a financially strained situation, firms in a financially strained situation lay off twice as many employees. The amplifying effect of financial tightness is similar in upturns and downturns, implying that financially tight firms not only reduce their workforce more when demand decreases but also hire more labour when demand increases.
  • Taylor rules and exchange rate predictability in emerging economies
    Item type: Journal Article
    Galimberti, Jaqueson K.; Moura, Marcelo L. (2013)
    Journal of International Money and Finance
  • The euro at 20: Evaluating the real side of the economic and monetary union
    Item type: Other Journal Item
    Campos, Nauro F.; Sturm, Jan-Egbert (2022)
    Journal of International Money and Finance
Publications 1 - 10 of 16