RESEARCH THESIS SUBMITTED TO THE FACULTY OF COMMERCE, LAW & MANAGEMENT IN PARTIAL FULLFILMENT OF THE REQUIREMENTS OF THE MASTER OF MANAGEMENT IN FINANCE & INVESTMENTS DEGREE UNIVERSITY OF THE WITWATERSRAND JOHANNESBURG February, 2016 / In this study we examine the relationship between international oil prices and the South African Rand/US Dollar exchange rate. We also determine the direction of causality between these two variables. We further ascertain the magnitude of the influence of oil prices to the exchange rate compared to other theoretically driven macroeconomic variables. A forecasting exercise is also undertaken to determine whether oil prices contain information about future Rand/Dollar exchange rate. Drawing from the works of Aliyu (2009) and Jin (2008) we use VAR based cointegration technique and vector error correction model (VECM) for the long run and short run analysis respectively. The results show that there is a unidirectional causality running from oil prices to exchange rate and not the other way round. We also find that a 1% permanent increase in oil prices results in 0.17% appreciation of the Rand against the US Dollar; a 1% permanent increase in money aggregates results in 21.3% depreciation of the Rand and a 1% increase in business cycles results in 0.29% depreciation of the Rand in the long run. A 1% increase in inflation and interest rates is found to result in a 0.09% and 0.005% depreciation on the Rand respectively. Our short run analysis indicates that 4.4% of the Rand/Dollar exchange rate disequilibrium can be corrected within a month. Oil prices are found to contain some information about the future Rand/US Dollar exchange rate when the VAR model is used for forecasting. This study has shown there is a causal relationship between oil prices and the strength of the Rand against the Dollar and, therefore, recommends diversification of the economy and more use of green energy. Strategies to reduce capital flight and trade-related capital is also recommended by this study. Key Words: Exchange rate, Oil price, forecasting, vector autoregressive (VAR) model, cointegration, vector error correction model (VECM), causality / MT2016

The main goal of this research is to investigate whether foreign exchange transacting costs are an impediment to intra-regional trading within the Southern African Development Community SADC region. The research question posed has been whether foreign exchange trading costs affect the amount of intra-regional trading within the SADC region. Once the impediments relating to regional trading have been broken down and the cost effect on Small, Medium and Micro Enterprises SMMEs is established, then possible solutions are proposed. The research discovers that the cost of foreign exchange has an impact on intra-regional trading, but it is not the main hindrance to intra-regional trading in the SADC. It also discovers that the settlement risk of a foreign exchange transaction in the region has not yet been addressed to the same or similar extent as in the developed world. The extent of trading partners’ currency volatility is a function of the amount of trade between those trading partners. The SADC countries’ currency pairs volatility can be reduced by increased trade. Having said that, businesses need to plan and high levels of volatility tend to be disruptive. This is now the area where it is suggested that central banks within the region should actively participate in foreign exchange markets. Central banks should be the facilitator or price-maker of last resort in cases of lack of liquidity of local or foreign currencies. The research suggests that they should play a role in ensuring or reducing the amount of rapid currency spikes that lead to disorderly markets. The research also discovers that SMMEs are a core part of the economies of developing countries, and therefore a serious look at this sector of the economy is suggested. Mobile communication networks, like cell phones, are the current accessible and preferred communications tool among the geographical regions and areas that are hard to reach. Cell phones have also doubled as a form of payment among rural, African countries. The research suggests leeching on the current cell phone iii banking platforms to enable better foreign exchange reach to SMMEs and the general public. It suggests interlinking relationships between banks and cell phone networks, where the cell phone companies facilitate the accessibility and the banks’ liquidity. The report takes cognisance of the fact that, inasmuch as the countries in SADC are geographically close to each other, their political, economic and social dynamics can be wildly different. This would therefore mean that the proposed solutions are not necessarily a one-size-fits-all, but could be adjusted and tweaked to suit individual country dynamics.

Este trabalho tem como analisa principal a estratégia de hedge para o exportador de café nas principais regiões brasileiras, utilizando o modelo tradicional de hedge de variância mínima para a receita. São propostas quatro estratégias: sem hedge, hedge de preço do café, hedge de câmbio e hedge simultâneo de preço do café e câmbio. Chega-se à conclusão que a estratégia de hedge simultâneo de preços e câmbio é mais efetiva em diminuir a variância da receita do produtor em relação a outras estratégias analisadas. A redução do risco de taxa de câmbio, em conjunto com o risco de preços é importante para a gestão estratégica dos exportadores de commodities. / This thesis aims to analyze the hedging strategies for coffee export in the main Brazilian regions, using the traditional model of minimum variance hedge. In this way, four hedging strategies were proposed: no hedge, hedge coffee prices, exchange hedge and hedge simultaneous coffee prices and exchange rates. The result show that the hedging strategy of simultaneous price and exchange is more effective in reducing the variance of revenue producer comparing with other strategies analyzed. Reducing the risk of exchange rate, together with the price risk is important for the strategic management of commodity exporters.

by Chiu Man-cheong and Lo Kin-chung. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1994. / Includes bibliographical references (leave 1 (4th gp.)). / ABSTRACT --- p.iii / TABLE OF CONTENTS --- p.iv / ACKNOWLEDGEMENT --- p.vi / Chapter / Chapter I. --- INTRODUCTION --- p.1 / Chapter II. --- LITERATURE REVIEW --- p.4 / Variations --- p.7 / Ratio Analysis --- p.13 / Applications on Real Markets --- p.14 / Chapter III. --- METHODOLOGY --- p.16 / Wave Counting --- p.20 / Fibonacci Targets --- p.22 / Data Source --- p.23 / A Note on Notations --- p.23 / Chapter IV. --- RATIO ANALYSIS --- p.25 / Fibonacci Relationships --- p.25 / Results of Ratio Analysis --- p.28 / Wave 2 --- p.29 / Wave 3 --- p.30 / Wave 4 --- p.30 / Wave 5 --- p.31 / Summary of Results / Chapter V. --- FORMULATION OF TRADE PLANS AND RESULTS OF SIMULATED TRADING --- p.32 / Formulation of Trade Plans --- p.33 / Trade Plan No. 1 --- p.35 / Pre-conditions of Trade --- p.35 / Trade Initiation --- p.36 / Cut-loss Mechanism --- p.38 / Profit Taking --- p.39 / Trade Plan No. 2 --- p.41 / Pre-conditions of Trade --- p.42 / Trade Initiation --- p.42 / Cut-loss Mechanism --- p.43 / Profit Taking Point --- p.44 / Trade Opportunities Scan --- p.46 / Trade Case 1 --- p.52 / Pre-conditions --- p.52 / Trade Initiation --- p.52 / Profit-taking/Cut-loss --- p.53 / Trade Case 2 --- p.54 / Pre-conditions --- p.54 / Trade Initiation --- p.55 / Profit-taking/Cut-loss --- p.56 / Trade Case 5 --- p.57 / Pre-conditions --- p.57 / Trade Initiation --- p.58 / Profit-taking/Cut-loss --- p.58 / Results of Simulated Trade --- p.59 / Discussions on Simulated Trading --- p.62 / Chapter VI. --- WAVE ANALYSIS AND MARKET PERSPECTIVES --- p.65 / Analysis of the Broadest Swing --- p.66 / Phase 1 Price Movement --- p.67 / Phase 2 Price Movement --- p.70 / Future Market Perspectives --- p.78 / Chapter VII. --- DISCUSSIONS --- p.82 / Experience in Wave Counting --- p.82 / Limitations of Elliott Wave --- p.85 / Practical Issues --- p.86 / Chapter VIII. --- CONCLUSIONS --- p.92 / APPENDICES --- p.A-l / Chapter 1. --- RESULTS OF RATIO ANALYSIS --- p.A-2 / Chapter 2. --- DETAILS OF SIMULATED TRADING --- p.A-3 / BIBLIOGRAPHY --- p.B-l

Zhang Haiyan. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2001. / Includes bibliographical references (leaves 48-50). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Literature Review --- p.6 / Chapter 2.1 --- An Introduction to the Uncovered Interest Parity (UIP) and previous works on UIP --- p.6 / Chapter 2.2 --- Previous empirical works applying Band Spectrum Regression(BSR) --- p.15 / Chapter 3 --- Basic Band Spectral Regression (BSR) Techniques --- p.20 / Chapter 3.1 --- BSR Based on the complex Fourier transform --- p.20 / Chapter 3.2 --- BSR based on the real-valued Fourier transform --- p.24 / Chapter 3.3 --- Testing for parameter stability in the frequency domain --- p.26 / Chapter 4 --- Data and Standard Time Series Analysis in the Time Domain --- p.29 / Chapter 5 --- Analyze the UIP relation in the frequency domain --- p.33 / Chapter 5.1 --- An overview of the UIP relation across frequency --- p.33 / Chapter 5.2 --- Testing parameter stability across different time horizons --- p.37 / Chapter 6 --- Test of UIP with the forward premium --- p.42 / Chapter 7 --- Conclusion --- p.45

by Zhi-Bin Lai. / Thesis submitted in: December 1998. / Thesis (M.Phil.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 111-116). / Chapter 1 --- Introduction --- p.1 / Chapter 1.1 --- ICA Model --- p.1 / Chapter 1.2 --- ICA Algorithms --- p.3 / Chapter 1.3 --- Foreign Exchange Rate Scheme --- p.9 / Chapter 1.4 --- Problem Motivation --- p.10 / Chapter 1.5 --- Main Contribution of the Thesis --- p.10 / Chapter 1.6 --- Other Contribution of the Thesis --- p.11 / Chapter 1.7 --- Organization of the Thesis --- p.11 / Chapter 2 --- Heuristic Dominant ICs Sorting --- p.13 / Chapter 2.1 --- L1 Norm Sorting --- p.13 / Chapter 2.2 --- Lp Norm (L3 Norm) Sorting --- p.14 / Chapter 2.3 --- Problem Motivation --- p.15 / Chapter 2.4 --- Determination of Dominant ICs --- p.15 / Chapter 2.5 --- ICA in Foreign Exchange Rate Markets --- p.16 / Chapter 2.6 --- Comparison of Two Heuristic Methods --- p.16 / Chapter 2.6.1 --- Experiment 1: US Dollar vs Swiss Franc --- p.18 / Chapter 2.6.2 --- Experiment 2: US Dollar vs Australian Dollar --- p.21 / Chapter 2.6.3 --- Experiment 3: US Dollar vs Canadian Dollar --- p.24 / Chapter 2.6.4 --- Experiment 4: US Dollar vs French Franc --- p.27 / Chapter 3 --- Forward Selection under MSE Measurement --- p.30 / Chapter 3.1 --- Order-Sorting Criterion --- p.30 / Chapter 3.2 --- Order Sorting Approaches --- p.30 / Chapter 3.3 --- Forward Selection Approach --- p.31 / Chapter 3.4 --- Comparison of Three Dominant ICs Sorting Methods --- p.32 / Chapter 3.4.1 --- Experiment 1: US Dollar vs Swiss Franc --- p.33 / Chapter 3.4.2 --- Experiment 2: US Dollar vs Australian Dollar --- p.37 / Chapter 3.4.3 --- Experiment 3: US Dollar vs Canadian Dollar --- p.41 / Chapter 3.4.4 --- Experiment 4: US Dollar vs French Franc --- p.45 / Chapter 4 --- Backward Elimination Tendency Error --- p.49 / Chapter 4.1 --- Tendency Error Scheme --- p.49 / Chapter 4.2 --- Order-Sorting Criterion --- p.50 / Chapter 4.3 --- Order Sorting Approaches --- p.50 / Chapter 4.4 --- Backward Elimination Tendency Error Approach --- p.51 / Chapter 4.5 --- Determination of Dominant ICs --- p.52 / Chapter 4.6 --- Comparison Between Three Approaches --- p.53 / Chapter 4.6.1 --- Experiment Results on USD-SWF Return --- p.53 / Chapter 4.6.2 --- Experiment Results on USD-AUD Return --- p.57 / Chapter 4.6.3 --- Experiment Results on USD-CAD Return --- p.61 / Chapter 4.6.4 --- Experiment Results on USD-FRN Return --- p.65 / Chapter 5 --- Other Analysis of ICA in Foreign Exchange Rate Markets --- p.69 / Chapter 5.1 --- Variance Characteristics of ICs and PCs --- p.69 / Chapter 5.2 --- Reconstruction Ability between PCA and ICA --- p.70 / Chapter 5.3 --- Properties of Independent Components --- p.70 / Chapter 5.4 --- Autocorrelation --- p.73 / Chapter 5.5 --- Rescaled Analysis --- p.73 / Chapter 6 --- Conclusion and Further Work - --- p.78 / Chapter 6.1 --- Conclusion --- p.78 / Chapter 6.2 --- Further Work --- p.79 / Chapter A --- Fast Implement of LPM Algorithm --- p.80 / Chapter A.1 --- Review of Selecting Subsets from Regression Variables --- p.80 / Chapter A.2 --- Unconstrained Gradient Based Optimization Methods Survey --- p.85 / Chapter A.3 --- Characteristics of the Original LPM Algorithm --- p.88 / Chapter A.4 --- Constrained Learning Rate Adaptation Method --- p.89 / Chapter A.5 --- Gradient Descent with Momentum Method --- p.98

The goal of this diploma thesis is to assess the suitability and readiness of the Slovak Republic to adopt a single European currency. In analyzing the costs and benefits relating to Slovakia?s accession to the EMU, this thesis is guided by the theory of the OCA. The thesis provides a survey of the OCA theory, attempts to measure some of the OCA indicators and calculate OCA index for Slovakia. The results suggest that Slovakia fulfils the necessary condition for joining the monetary union, i.e. it is relatively well aligned with the euro area. The diploma thesis concludes that Slovakia is relatively suitable and well-prepared to join the euro area in 2009.

This study empirically investigates the relationship between fiscal deficit, inflation, M3 money supply and the exchange rate in South Africa. The study makes use of quarterly macroeconomic time-series data sets comprising 84 observations, covering the period from 1994Q1 to 2015Q4. The unit root tests conducted employed the Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) tests. The results reveal that the variables become stationary at first difference. The Johansen co-integration technique suggests that there is at least one co-integrating equation among the variables. The results of the Engle-Granger approach, which is residual based, show that the residuals are stationary, thus validating the existence of a long-run relationship between the model variables. The study carried out a Granger causality test. The results indicate that there is a strong Granger causal relationship between the variables (IF) and (FD). Another strong causal relationship emerges between inflation and money supply. The ECM model was employed to identify the speed of adjustment as a response to the departures from the long-run equilibrium path. The estimated coefficient of the ECM error term has the required sign and is statistically significant at the five per cent level of significance. The error term indicates a quick convergence to equilibrium. The study concludes that the dependent variable (FD) is jointly caused by all the independent variables in the long-run. The results of the variance decomposition of the variable (FD) to innovations resulting from IF, MS and RER indicate that own shocks remain the dominant source of total fluctuations in the forecast error of the variables. The findings of the study are efficient and reliable as the estimated model passed all the major diagnostic tests. By implication the findings suggest that the estimated model show high goodness of fit and is thus reliable for policy making. The study recommends a fiscal adjustment that will enhance economic growth. Additionally, a fiscal policy that will aim at identifying and mitigating other possible leakages that narrow the tax base should be considered.

In the post Bretton Woods era, the volatile nature of exchange rates has been the focus of many researchers. Although some previous studies suggest that variations in an exchange rate has the potential to affect a country’s economic performance, LDC’s (Less Developed Countries’) have received less attention compared to industrialized or developed economies. In this thesis we analyse the nature of exchange rate behaviour in three LDCs: Ghana, Mozambique and Tanzania. These countries have gone through comparable policy engagements with the IMF, have followed similar floating exchange rate regimes since early 1990s and currently all adhere to the IMF convention of free current account convertibility and transfer (Ghana and Tanzania accepted Article VIII of IMF “Articles of Agreement” in 1994. Mozambique began floating in 1992 under the SAP reforms of IMF; Article IV consultation was completed in 2009 and acceptance of Article VIII seems imminent).The main content of the thesis can be summarised as follows.I. We examine whether exchange rate behaviour in these three countries are influenced by similar factors. In order to justify the applicability of a number of volatility modelling techniques, we also examine the data to find if they exhibit the empirical regularities found in other exchange rate/financial markets such as volatility clustering, non-linearity, non-normality and asymmetry. Our results suggest that exchange rate behaviour in these countries is generally influenced by similar factors. In particular, we find that the series exhibit the empirical regularities found in other exchange rate/financial markets, justifying the application of the ARCH methodology which we use to estimate the volatility of exchange rate in these countries. We however observed that the ARCH family of models does not always produce the best fit. For instance, volatility forecasts generated by an Exponentially Weighted Moving Average (EWMA) model based on the RiskMetricsTM estimation technique produces the best fit for the daily Ghanaian exchange rate series under consideration compared to volatility forecasts from our estimated ARCH family of models.II. We explore the causal relationship between exchange rate depreciation and uncertainty/volatility using the VAR toolkit. Our main motivation for this study is to analyse whether the changes in the levels of exchange rate as a result of appreciation or depreciation in an underlying currency changes the level of exchange rate uncertainty (volatility). Further, we also analyse the reverse causal relationship; whether increasing uncertainty feeds back into the exchange rate market. We find a bi-directional Granger causal relationship between the level of exchange rate and uncertainty in the foreign exchange markets. Despite adopting similar macro-policies since the mid 1980s and early 1990s, uncertainty in the Tanzanian exchange rate as a response to changes in the level of exchange rate takes a shorter length of time to dissipate. We attribute this to the macroeconomic policies undertaken by Tanzanian policymakers which have ensured price and currency stability.The reverse causality reflects the effectiveness of the Tanzanian macro-policies and the confidence in them; we observed that intervention reduces uncertainty in the Tanzanian exchange rate, whereas for Ghana and Mozambique, macro-policies intending to mitigate undesired exchange rate changes rather create further uncertainty in their exchange rate markets. For all three LDCs under consideration, we observed that effects of shocks to exchange rate from innovations in uncertainty for each country is fleeting III. We investigate the relationship between exchange rate volatility and economic performance (via trade) for each of these countries and some of their biggest trade partners. Exchange rate volatility resulting from a depreciating underlying currency of trade can potentially affect the economic performance of a country. Using a gravity model augmented with variables that are deemed to influence earnings from trade, we observe that earnings from trade are not significantly affected by exchange rate volatility. We conjecture that in periods of uncertainty, traders increase the volume of trade to compensate for the ill effects of currency volatility.

Chung, Tsz Kin = 均值回復正態過程的雙撞擊時間分佈以及其在金融上的應用 / 鍾子健. / Thesis submitted in: December 2008. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2009. / Includes bibliographical references (leaves 101-105). / Abstracts in English and Chinese. / Chung, Tsz Kin = Jun zhi hui fu zheng tai guo cheng de shuang zhuang ji shi jian fen bu yi ji qi zai jin rong shang de ying yong / Zhong Zijian. / Chapter 1 --- Introduction --- p.1 / Chapter 1.1 --- Overview --- p.1 / Chapter 1.2 --- Mean-reverting lognormal (MRL) process --- p.3 / Chapter 1.3 --- MRL-process and AR(l)-process --- p.5 / Chapter 2 --- Double Hitting Time Distribution of a Mean-Reverting Log-normal Process --- p.8 / Chapter 2.1 --- Introduction --- p.8 / Chapter 2.2 --- Probability density function --- p.9 / Chapter 2.3 --- Interpolation scheme - estimates and bounds --- p.12 / Chapter 2.4 --- Multi-stage approximation scheme --- p.17 / Chapter 2.5 --- Hitting time distribution and density --- p.19 / Chapter 2.6 --- Numerical analysis --- p.20 / Chapter 2.7 --- Appendix --- p.24 / Chapter 2.7.1 --- Solving the Fokker-Planck equation --- p.24 / Chapter 2.7.2 --- Probability density function associated with two piecewise-continuous boundaries --- p.27 / Chapter 3 --- Pricing Exotic Options with Mean Reversion --- p.29 / Chapter 3.1 --- Introduction --- p.29 / Chapter 3.2 --- Barrier options --- p.30 / Chapter 3.2.1 --- Double barrier options --- p.32 / Chapter 3.2.2 --- Rebates --- p.33 / Chapter 3.2.3 --- Numerical examples --- p.34 / Chapter 3.3 --- Lookback options --- p.36 / Chapter 3.3.1 --- Expected minimum and maximum --- p.37 / Chapter 3.3.2 --- Standard lookback options --- p.41 / Chapter 3.3.3 --- Fixed strike lookback options --- p.42 / Chapter 3.3.4 --- Lookback spread option --- p.43 / Chapter 3.3.5 --- Numerical examples --- p.43 / Chapter 3.4 --- Sensitivity analysis --- p.46 / Chapter 3.4.1 --- Analysis ´ؤ double knock-out call option --- p.47 / Chapter 3.4.2 --- Analysis ´ؤ floating strike lookback put option --- p.52 / Chapter 3.4.3 --- Analysis ´ؤ lookback spread option --- p.56 / Chapter 3.4.4 --- Summary --- p.60 / Chapter 3.5 --- Appendix --- p.61 / Chapter 3.5.1 --- Closed-form price formula of the double knock-out call option --- p.61 / Chapter 3.5.2 --- Derivations of lookback options --- p.63 / Chapter 4 --- Using First-Passage-Time Density to Assess Realignment Risk of a Target Zone --- p.66 / Chapter 4.1 --- Realignment risk of a target zone --- p.66 / Chapter 4.1.1 --- Currency option market and target zone --- p.66 / Chapter 4.1.2 --- First-Passage-Time approach --- p.67 / Chapter 4.1.3 --- Option price and implied volatility --- p.69 / Chapter 4.1.4 --- FPT density and realignment risk --- p.73 / Chapter 4.2 --- The ERM crisis of 1992 --- p.74 / Chapter 4.2.1 --- British pound (GBP) target zone --- p.74 / Chapter 4.2.2 --- Italian lira (ITL) target zone --- p.81 / Chapter 4.2.3 --- Summary --- p.85 / Chapter 5 --- Market Expectation of Appreciation of the Renminbi --- p.87 / Chapter 5.1 --- The Chinese Renminbi exchange rate system --- p.87 / Chapter 5.2 --- First-Passage-Time approach --- p.90 / Chapter 5.3 --- Estimations of expected maximum appreciation of Renminbi --- p.92 / Chapter 5.4 --- Appendix --- p.99 / Chapter 5.4.1 --- Derivations of the expected minimum and maximum --- p.99 / Bibliography --- p.101