Currency Risk: Comovements and Intraday Cojumps

Jérôme Lahaye

Annals of Economics and Statistics, 2016, issue 123-124, 53-76

Abstract: This paper identifies sources of risk in currency returns. We investigate intraday jump intensity in 6 foreign exchange markets (EUR/USD, USD/JPY, USD/CHF, GBP/USD, AUD/USD and USD/CAD) as well as bivariate cojumps in the related 15 market pairs. We use the Lee-Mykland test for jumps and a simple bootstrap approach to identify bivariate cojumps with intraday returns and realized measures. Cojump patterns such as cojump sign, or occurrence timing, are to some extent consistent with U.S. news causing cojumps. Whereas jump intensity is rather similar throughout markets, we find substantial heterogeneity in the way market pairs are connected through cojumps.

Keywords: Cojump; Jump; Bootstrap; Diffusion; Brownian; Semimartingale; High-Frequency; Risk; Diversification; Foreign Exchange; Correlation; Crisis; Tail (search for similar items in EconPapers)
JEL-codes: C12 C14 C15 C32 C33 C58 F31 G12 G14 G15 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2016:i:123-124:p:53-76

DOI: 10.15609/annaeconstat2009.123-124.0053

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