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Three Essays on: Hedging in China's Oil futures market; Gold, Oil and Stock Market Price Volatility links in the USA; and, Currency Fluctuations in S.E. and Pacific Asia

Chen, Wei (2009)
Ph.D. thesis, University of Birmingham.

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Abstract

This thesis empirically evaluates three key financial and macroeconomic issues: Essay 1 examines the effectiveness of China fuel oil futures in hedging a domestic spot fuel oil position as well as hedging a spot position in the Singapore fuel oil market. To the best of our knowledge, this is the first study of this kind. Dynamic Bi-variate GARCH and constant volatility models are estimated to derive the optimal hedging ratios and hedging effectiveness of China fuel oil futures. That effectiveness is assessed by several criteria, for both in- and out-of-sample periods. Essay 2 aims to investigate the relationship between the oil, gold and US stock markets. By employing a Tri-variate GARCH(1,1) model, this is the first study to explore how volatility is transmitted among those three markets. Additionally, this is the first study to compare Tri-variate GARCH and Bi-variate GARCH modelling strategies as vehicles for determining the volatility interrelations between these markets. Essay 3 explores the power of conventional macroeconomic factors to explain the currency fluctuations over recent years, including the 1997 crises, in six Asian countries. Two regimes Markov Switching TGARCH and constant volatility models are used to determine the causes of market pressures on exchange rates, and the probability of the timing of a currency attack. The Markov Switching models do not require an ex-ante definition of a threshold value to distinguish stable and volatile state like Logit models do, and they can capture the appreciating currency attacks as well as the depreciating ones. The Markov Switching models are also compared with Multinomial Logit models in their ability to detect crises.

Type of Work:Ph.D. thesis.
Supervisor(s):Ford, James (Professor) and Dickinson, David G.
School/Faculty:Colleges (2008 onwards) > College of Social Sciences
Department:Department of Economics
Subjects:HG Finance
HB Economic Theory
Institution:University of Birmingham
ID Code:397
This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder.
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