Thesis (M.M. (Finance & Investment)--University of the Witwatersrand, Faculty of Commerce, Law and Management, Wits Business School, 2017. / This study examines the relationship between major commodity exports and the real exchange rate of commodity exporting countries. We make use of monthly commodity price time series data to determine the causality relationship between exchange rates and the top three commodity exports from 5 commodity exporting countries (Brazil, Chile, Mexico, Norway and South Africa). Due to the phenomenon called “Dutch Disease” commodity exporting countries’ economies are found not to experience large economic success during periods of booming export commodity prices. Using data from the IMF IFS database, only one country out of the five included in this study shows evidence of conitegration relationship between commodity prices and exchange rates, although there is some evidence of commodity prices explaining the movement of exchange rates in all five countries. We find that commodity prices do play a role in the exchange rates movement in commodity exporting countries. / MT2017

Building automated trading systems has long been one of the most cutting-edge and exciting fields in the financial industry. In this research project, we built a trading system based on machine learning methods. We used the Recurrent Reinforcement Learning (RRL) algorithm as our fundamental algorithm, and by introducing Genetic Algorithms (GA) in the optimization procedure, we tackled the problems of picking good initial values of parameters and dynamically updating the learning speed in the original RRL algorithm. We call this optimization algorithm the Evolutionary Recurrent Reinforcement Learning algorithm (ERRL), or the GA-RRL algorithm. ERRL allows us to find many local optimal solutions easier and faster than the original RRL algorithm. Finally, we implemented the GA-RRL system on EUR/USD at a 5-minute level, and the backtest performance showed that our GA-RRL system has potentially promising profitability. In future research we plan to introduce some risk control mechanism, implement the system on different markets and assets, and perform backtest at higher frequency level.

This dissertation addresses two major issues. First, it investigates whether currency risk commands a significant premium in representative equity markets in Africa. The International Arbitrage Pricing Theory and the Stochastic Discount Factor model respectively provide the analytical frameworks for the unconditional and the conditional asset pricing models used to investigate currency risk pricing. Empirical data analysis uses the Generalized Method of Moments estimation technique. Second, it examines the nexus between real foreign exchange rates and net international portfolio flows in representative capital markets in Africa. Time series and panel data techniques are employed to this end. The study covers seven major African countries: Botswana, Egypt, Ghana, Kenya, Morocco, Nigeria, and South Africa over the period January 1997 through December 2009. Foreign exchange risk is found to be non-priced unconditionally when returns are measured in the US dollar; weakly priced unconditionally when returns are measured in the euro; and priced with time-varying risk premia in the conditional sense. Africa’s equity markets are found to be partially integrated with the rest of the world. Monthly international portfolio flows to Africa are found to be low, non-persistent and relatively volatile. Using monthly data, Granger causality tests and innovation accounting from vector autoregressions (VARs), the study shows that the dynamic relationship between the real exchange rates and net portfolio flows is both country-dependent and time-varying. The findings are robust to alternative VAR specifications. However, annual data exhibit strong causality moving from real exchange rates to net portfolio flows, suggesting that fluctuations in real exchange rates inform the investment decisions of foreign investors in Africa’s capital markets. Among the key policy implications, it is recommended that, in addition to the US dollar and precious metals, Africa’s monetary authorities should regard the euro as an important reserve currency; that policies be put in place to expedite the development of private fixed income securities and derivatives markets; that sound monetary policies be instituted to ensure that interest rate changes are market-determined and inflationary pressures are well-managed; and that regional markets integration and financial sector development policies be pursued more meticulously by governments in Africa.

This dissertation examines the pricing of the same credit risk in two currencies, and hence the valuation of credit-contingent foreign exchange products. Such pricing hinges upon the dependence of the credit risk and the foreign exchange rate. We recall the reduced-form model proposed by Ehlers (2007), which allows credit-currency dependence through correlation between the Brownian motions driving the default intensity and the exchange rate, and through a jump in the exchange rate at the default time. Four basic specifications of this model are considered. Two of these specifications have not previously appeared in the literature and one of these, based on a lognormal process for the default intensity, proves to be especially useful and tractable. The problem of hedging defaultable claims in one currency with similar claims in another is briefly considered, and it is shown that hedging against the default event and against credit spread movements are not in general equivalent.

The first essay formulates a dynamic rational contagion model in order to analyse the evolution of speculative bubbles. The model consists of two laws of motion: the speculative bubble and the probability of the bubble. The rst essay shows that the model has two stable equilibria and one unstable equilibrium. The dynamics of both the nonlinear speculative bubbles and the probability interact to form two stable equilibria and one unstable equilibrium which lead to ballooning and busting of the speculative bubbles. These features of speculative bubbles are driven by the speculators’s herd behaviour, the bubbles size, the speed of change, the strength of infection, and the effects of both the bubbles and the short-term interest rate on the transition probability. The second essay extracts speculative bubbles from two nancial markets: the foreign exchange and the stock markets for South Africa between 1995Q2 and 2008Q4. The second essay uses the no-arbitrage models for the exchange rate and the stock price. By invoking the rational bubbles theory and using the residuals, we compute the asset price bubbles using the expectational restriction for rational bubbles theory. Three robustness checks on the computed bubbles con rm that speculative bubbles are present in the stock price and the exchange rate. By using iii Abstract iv graphs of speculative bubbles, we show that the speculative bubbles are consistent with the existence of bubble episodes as documented in the literature. The third essay formulates a macro-model of a small-open economy in order to investigate the relative performance of optimal monetary policy rules that respond to speculative bubbles and those that do not. The model consists of two nonlinear speculative bubbles: the stock price and the exchange rate bubbles. These speculative bubbles interact with the IS curve, the Phillips curve and the asset prices. The ndings show that policy rules that respond to speculative bubbles dominate rules that do not.

Thesis (Ph.D. (Economics))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Economic & Business Sciences, 2016. / The objective of this thesis is to investigate the recent historical dynamics of the four major nominal bilateral spot foreign exchange rates and the fifteen currency-basket nominal effective exchange rate of the South African rand (hereafter referred to as the rand). The thesis has been organised as three separate studies that add to the advancement of the knowledge of the characteristics and behaviour (causal effects) of the rand. The common thread that holds the individual chapters together is the study of the dynamics of the rand. In particular, the study establishes whether the apparent nonstationarity of the exchange rate is a product of unit root test misspecification (a failure to account for structural change), considers the connexions between the timing of the identified structural shifts and important economic and noneconomic events, and analyses rand volatility and the temporal effect of monetary policy surprises on both the spot foreign exchange market returns and volatility of the rand. In order to do this, low- and high-frequency data are employed. With regard to exchange rate modelling, the theoretical economic-exchange rate frameworks are approached both from the traditional macro-based view of exchange rate determination and a micro-based perspective. The various methodologies applied here tackle different aspects of the exchange rate dynamics. To preview the results, we find that adjusting for structural shifts in the unit root tests does not render any of the exchange rates stationary. However, the results show a remarkable fall in the estimates of volatility persistence when structural breaks are integrated into the autoregressive conditional heteroskedasticity (ARCH) framework. The empirical results also shed light on the impact of modelling exchange rates as long memory processes, the extent of asymmetric responses to ‘good news’ and ‘bad news’, the consistencies and contrasts in the five exchange rate series’ volatility dynamics, and the timing and likely triggers of volatility regime switching. Additionally, there are convincing links between the timing of structural changes and important economic (and noneconomic) events, and commonality in the structural breaks detected in the levels and volatility of the rand. We also find statistically and economically significant high-frequency exchange rate returns and volatility responses to domestic interest rate surprises. Furthermore, the rapid response of the rand to monetary policy surprises suggests a relatively high degree of market efficiency (from a mechanical perspective) in processing this information. Keywords: Exchange rate, expectations, long memory, monetary policy surprises, repo rate, structural breaks, volatility; unit root. JEL Code: C22, E52, E58, F31, F41, G14 and G15

by Mok Man-fai, Mansfield. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1990. / Bibliography: leaves 49-50. / ABSTRACT --- p.i / ACKNOWLEDGEMENT --- p.ii / TABLE OF CONTENTS --- p.iii / Chapter / Chapter I. --- INTRODUCTION --- p.1 / Chapter II. --- EURODOLLAR FUTURES AND OPTIONS --- p.3 / Eurodollar Futures --- p.3 / Hedging With Eurodollar Futures --- p.4 / Options On Eurodollar Futures --- p.5 / Contract Type --- p.5 / Contract Style --- p.6 / Contract Lifespan --- p.6 / Contract Value --- p.6 / Hedging With Eurodollar Options --- p.7 / Naked Positions --- p.7 / Chapter III. --- ASSET/LIABILITY MANAGEMENT --- p.9 / Gap Concept --- p.10 / Gap Analysis --- p.11 / Types of Gaps --- p.12 / Positive And Negative Gaps --- p.13 / Voluntary And Involuntary Gaps --- p.13 / Chapter IV. --- HEDGING THE GAP --- p.14 / Macro Hedge --- p.14 / Micro Hedge --- p.17 / Macro Hedge vs Micro Hedge --- p.17 / Chapter V. --- HEDGING METHODOLOGY --- p.19 / Cross Hedge Basis Risk --- p.20 / Hedge Ratio --- p.20 / Time Basis Risk . . --- p.21 / Basic Hedge With No Time Basis Risk --- p.23 / Example 1: Single 90-Day Gap --- p.24 / Example 2: Single 30-Day Gap --- p.24 / Example 3: Single 180-Day Gap --- p.25 / Example 4: Series of 90-day gaps --- p.25 / Example 5: Series of 30-Day Gaps --- p.26 / Basic Hedge With Time Basis Risk --- p.27 / Hedging Of A Series Of Liability Issues --- p.32 / Strip hedge --- p.32 / Stack hedge --- p.33 / Chapter VI. --- OPTIONS AND FUTURES --- p.35 / Similarities and Differences --- p.35 / Merits And Demerits --- p.37 / Chapter VII. --- REASONS FOR HEDGING --- p.39 / Merits --- p.39 / Demerits --- p.40 / Chapter VIII. --- THE SITUATION IN HONG KONG --- p.42 / Chapter IX. --- CONCLUSION --- p.45 / APPENDIX --- p.47 / BIBLIOGRAPHY --- p.49

Lam, Yu Fung. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2009. / Includes bibliographical references (leaves 40-43). / Abstract also in Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Methodology --- p.6 / Chapter 2.1 --- Brownian Motion --- p.6 / Chapter 2.2 --- Reflected Brownian Motion --- p.8 / Chapter 2.3 --- Partially Reflected Brownian Motion --- p.11 / Chapter 3 --- Numerical Analysis --- p.15 / Chapter 3.1 --- Comparison of RBM and PRBM --- p.15 / Chapter 3.2 --- Initial state far from the boundaries --- p.17 / Chapter 3.3 --- Initial state close to a boundary --- p.17 / Chapter 4 --- A Study of the USD/HKD Exchange Rate --- p.23 / Chapter 4.1 --- Data Description --- p.23 / Chapter 4.2 --- Testing for the Mean-reverting Property --- p.25 / Chapter 4.3 --- Testing for Decreasing Volatility near the Boundaries --- p.27 / Chapter 4.4 --- Estimation Results --- p.27 / Chapter 5 --- Conclusion --- p.31 / Chapter A --- Derivation of MLE estimator --- p.33 / Chapter B --- Numerical Laplace Inversion --- p.35 / Chapter C --- Augmented Dickey-Fuller Test --- p.39 / Bibliography --- p.40

Thesis. 1977. Ph.D.--Massachusetts Institute of Technology. Dept. of Economics. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY. / Vita. / Bibliography : leaves 326-330. / Ph.D.

Thesis. 1978. Ph.D.--Massachusetts Institute of Technology. Dept. of Economics. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND DEWEY. / Bibliography: leaves 105-109. / Ph.D.