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Financial convergence on emerging markets: the case of CEE countries

Michał Fronc () and Piotr Mielus ()
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Michał Fronc: Warsaw School of Economics, Collegium of Management and Finance
Piotr Mielus: Warsaw School of Economics, Collegium of Economic Analysis

Bank i Kredyt, 2017, vol. 48, issue 2, 149-172

Abstract: This paper investigates information embedded in the most liquid derivative instruments regarding the scope of convergence reported on the financial market in the emerging CEE countries. We present a proposal of the index that measures the scale of convergence between local and global derivative prices. The financial convergence index (FCI) encompasses a basket of prices that are remarkable for evaluation of the current state of converging economies. The study covers OTC foreign exchange and interest rate markets, as these segments are the most liquid areas of emerging markets. Moreover, we analyse the connection between derivatives pricing and broad market equity indices. The index provides evidence of a divergence process observed in the course of the financial crisis and presents a similar pattern to equity benchmarks.

Keywords: financial convergence; CEE derivative markets; financial crisis (search for similar items in EconPapers)
JEL-codes: G01 G10 G14 G15 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:nbp:nbpbik:v:48:y:2017:i:2:p:149-172