A Study of Currency Market Volatility in India During Its Pre and Post Derivative Period

International Journal Of Core Engineering & Management (IJCEM) Volume 1, Issue 6, September 2014

17 Pages Posted: 9 Oct 2014

See all articles by Saurabh Singh

Saurabh Singh

Devi Ahilya Vishwavidyalaya (DAVV) University - Graduate School of Business

L. K. Tripathi

Devi Ahilya Vishwavidyalaya (DAVV) University

Date Written: September 15, 2014

Abstract

The paper is aimed at examining the impact of introduction of currency derivatives on exchange rate volatility of Pound. The data used in this paper comprises of daily exchange rate of Pound in terms of Indian rupees for the sample period April 2006 to December 2013. To explore the time series properties Unit Root Test and ARCH LM test have been employed and to study the impact on underlying volatility GARCH (1, 1) model has been employed. The results indicate that the introduction of currency futures trading has helped in reducing the exchange rate volatility of the foreign exchange market in India. Further, the results are also indicative of the fact that the importance of recent news on spot market volatility has decreased and the persistence effect of old news has declined with the introduction of currency futures trading.

Keywords: Currency Futures, Exchange Rate, Forex Market, GARCH, Volatility

JEL Classification: C01, C32, C87, G11

Suggested Citation

Singh, Saurabh and Tripathi, L. K., A Study of Currency Market Volatility in India During Its Pre and Post Derivative Period (September 15, 2014). International Journal Of Core Engineering & Management (IJCEM) Volume 1, Issue 6, September 2014, Available at SSRN: https://ssrn.com/abstract=2502225

Saurabh Singh (Contact Author)

Devi Ahilya Vishwavidyalaya (DAVV) University - Graduate School of Business ( email )

RNT Marg
Indore, India
Indore, ME Madhya Pradesh 452001
India

L. K. Tripathi

Devi Ahilya Vishwavidyalaya (DAVV) University ( email )

RNT Marg
Indore, ME Madhya Pradesh 452001
India

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