Carry Trade, Exchange Rates, and the Balance-of-Payments

This paper presents a partial equilibrium model that integrates interest rate arbitrage with the balance-of-payments constraint to determine the real exchange rate. The sequential logic is the following: (i) carry-trade determines the term premium, with the spot rate showing greater volatility than the forward rate, (ii) uncovered interest rate parity determines the spot rate based on the real exchange rate consistent with a financial constraint, defined as a stable ratio of foreign reserves to foreign debt; and (iii) the trade balance consistent with the financial constraint determines the long-run real exchange rate for a given ratio of domestic to foreign income.

Impact of Greek Financial Crisis on the Value of Euro with the Other Major World Currencies

During the Greek Financial Crisis period (December 2009), Greece, one of the members of the EUROZONE, faced an unprecedented financial crisis which triggered gradual erosion in the value of EURO with respect to major world currencies during this period. During May 2010, the European Union agreed for a bailout package for Greece which was intended to prevent a further decline in the value of Euro. This study mainly focuses on the trend in the Exchange rate of Euro against the world’s major currencies during the period of Greek financial crisis and the predictability of Future spot exchange rates using the currency Futures rates. It has been noted that on an average the variation between Future spot rate and Currency futures rates has been highest in respect of INR/EURO and the lowest in respect of GBP/EURO. This indicates that the predictability of GBP/EURO futures rate as an indicator of future spot price has been the highest. Further, it has been found that the depreciation in the EURO exchange rate during the Greek financial crisis has been the highest against INR and lowest against GBP. This has been further confirmed by the fact that the Regression Coefficient of GBP/EURO has been the lowest while that of INR/EURO has been the highest.

The application of different term-structure models to estimate South African real spot rate curve

The purpose of this study is to investigate the suitable arbitrage-free term-structure model that might be able to fit the South African inflation-indexed spot-rate curve. The instrument has relatively less tradability in the market, which then translates into a lack of adequate data for bond valuation/pricing. Pricing deviations might give inflated/deflated projections on the value of government debt; consequently, higher estimated interest cost to be paid. A proper valuation of these instruments is mandatory as they form part of government funding/borrowing and the country’s budgeting processes in the medium term. The performance of newly developed non-linear multifactor models that follows the Nelson-Siegel (1987) framework was compared to the arbitrage-free Vasicek (1977) model and linear parametric models to assess any significant deviations in forecasting the real spot-rate curve over a short period. Models with constant parameters (i.e. linear parametric, cubic splines, Nelson-Siegel (1987) and Svensson (1994)) gave a perfect fit, they proved to marginally lose fitting capabilities during periods of higher volatility. Therefore, it could be concluded that the application of either Nelson-Siegel (1987) model or Svensson (1994) model on forecasting South African real spot-rate curve gave a perfect fit. However, for a solid conclusion to be derived, it is imperative to explore the performance of these models over a period of stressed market and economic conditions.

Future Spot Rate: The Implications in Indonesia

Investors, multinational companies and governments require a rate forecasting to make informed decisions about the hedging of debts and receivables, funding and short-term investments, capital budgeting and long-term financing. The process of making forecasting from market indicators, known as market-based forecasting, is usually developed based on spot rates and forward rates. The current spot rate can be used as forecasting, as the exchange rate reflects the market estimate of the spot rate in a short period of time. The forward rate is used in forecasting, as the exchange rate reflects the market estimate of the spot rate at the end of the forecasting period. Based on the research conducted by Chiang (1986) of the samples used, empirical evidence indicates spot rates and forward rates are significant as predictors of future spots. Empirical evidence suggests that spot rates provide better forecasting results compared to forward rates. The research uses regression models for market-based forecasting methods. The variables used in this study are spot rates, forward rates and future spots. The samples used are from Bank Indonesia for spot rates in January – March 2019 and future spot in April – June 2019, and from Jakarta Futures exchange for forward rates in January – March 2019. The Stochastic and Chow Test models are selected and their use has been evaluated using quality and precise testing measures. Based on the sample period used, empirical evidence suggests that spot rates and forward rates are significant in predicting future spots for EUR, JPY and AUD currencies. Current spot rates provide better forecasting results in predicting Future spot compared to the forward rate. Both the 15Ft"> and 15St"> coefficient are sensitive to new information from the variation of the coefficient and time, it can increase the forecasting of the equation to each currency exchange rate used. The study states that variables from time series should be effectively utilized and utilized in predicting currency exchange rates, as this research demonstrates the absence of dependence on time series Can be concluded that foreign exchange rates in each country follow a pattern that is not stationary. The spot Euro exchange rate turns out to be statistically more accurate with an error rate of 0.004144% forecasting with the value of regression coefficient of Euro exchange rate is a Future Spot = 21.504,88 – 0.341229Spot + 15et+1"> .

Randomised controlled trial of WISENSE, a real-time quality improving system for monitoring blind spots during esophagogastroduodenoscopy

ObjectiveEsophagogastroduodenoscopy (EGD) is the pivotal procedure in the diagnosis of upper gastrointestinal lesions. However, there are significant variations in EGD performance among endoscopists, impairing the discovery rate of gastric cancers and precursor lesions. The aim of this study was to construct a real-time quality improving system, WISENSE, to monitor blind spots, time the procedure and automatically generate photodocumentation during EGD and thus raise the quality of everyday endoscopy.DesignWISENSE system was developed using the methods of deep convolutional neural networks and deep reinforcement learning. Patients referred because of health examination, symptoms, surveillance were recruited from Renmin hospital of Wuhan University. Enrolled patients were randomly assigned to groups that underwent EGD with or without the assistance of WISENSE. The primary end point was to ascertain if there was a difference in the rate of blind spots between WISENSE-assisted group and the control group.ResultsWISENSE monitored blind spots with an accuracy of 90.40% in real EGD videos. A total of 324 patients were recruited and randomised. 153 and 150 patients were analysed in the WISENSE and control group, respectively. Blind spot rate was lower in WISENSE group compared with the control (5.86% vs 22.46%, p<0.001), and the mean difference was −15.39% (95% CI −19.23 to −11.54). There was no significant adverse event.ConclusionsWISENSE significantly reduced blind spot rate of EGD procedure and could be used to improve the quality of everyday endoscopy.Trial registration numberChiCTR1800014809; Results.

An Empirical Examination of Risk Premiums in the Indian Currency Futures Market

In this paper, we examine whether risk premiums are significant in explaining the deviations from the uncovered interest rate parity (UIP) condition in an emerging Indian currency futures market. In particular, we explore the unbiasedness of futures quotes as a predictor of the future spot exchange rate to understand the forward premium anomaly condition. We report huge deviations from the UIP condition for all currencies considered and show that these deviations are explained by the risk premium. The realized risk premiums for all currencies are found to be negative and significantly different from zero, which suggests that investors are awarded for taking short positions in the foreign currency. The realized risk premiums in turn are found to be negatively related to the current spot rate returns and positively to the futures premium, conditional variance of spot rate returns, and the dividend yield.

Brexit’s Protectionist Policy and Implications for the British Pound

In this paper, we examine the association among the macroeconomic variables - interest rate, inflation rate, unemployment, and the expected spot rate of the British pound with respect to the Euro around the announcement of “Brexit”, June 2016, using the two international parity relationships, Purchase Power Parity (PPP) and International Fisher effect (IFE). We use the two international parity relationships to examine the significance of change in daily interest rates and monthly inflation rates on the change in actual daily spot rates. In addition, we postulate that the protectionist nature of Brexit policy has contributed to lowering U.K. unemployment and prompted wage growth, resulting in higher inflation rates. Our analysis, examining both the magnitude and directional deviation of the actual spot rate compared to the spot rate using the two parity relations, indicate that spot rates predicted based on the PPP and the IFE relations suggest the weakening of the British pound after the Brexit announcement. Furthermore, we find that U.K. unemployment has reduced due to the expanded monetary policy, consistent with the prediction of the Phillip’s curve.