Causes of Exchange Rate Volatility and Risk Management in International Transactions

This assignment discusses the main causes of exchange rate volatility in foreign exchange markets and explores the nature of potential risks in international transactions. It also critically examines the way in which international traders can manage risks in derivative markets. The assignment covers topics such as exchange rate volatility, risks in international transactions, hedging, and the level of informational efficiency of the London Stock Exchange market.

Project

Table of Contents
Table of Contents.............................................................................................................................2
INTRODUCTION...........................................................................................................................1
QUESTION 1..................................................................................................................................1
a. Critical discussion of the main causes of the exchange rate volatility in the foreign exchange
markets.........................................................................................................................................1
b. Explanation of the nature of potential risks in international transactions and critical
discussion of the way in which international traders might manage the risks in derivative
market..........................................................................................................................................4
QUESTION 2..................................................................................................................................6
Carrying out the financial econometrics investigation to critical examine the level of
informational efficiency of the London Stock Exchange market................................................6
QUESTION 3................................................................................................................................11
Critical examination of the way in which recent interest rate policy and quantitative easing
operations via short term international money markets have impacted international capital
markets and stock prices............................................................................................................11
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
International financial market could be defined as a place where different buyers and
sellers of financial assets perform trading related activities. Some of the assets that are traded
through this market are stock, currencies, derivatives, bonds and commodities. There are several
types of markets which are used for the purpose of conducting the trading activities. These are
capital, money, derivatives and commodity markets. For smooth operation of capitalist
economies, it is very important to maintain the financial markets in systematic manner. The
international currency market is the largest financial market at global level where the average
trading of five dollar trillion is performed on daily basis. Large banks and brokers from different
countries performed trading related activities in this market. Some of the main function of the
market are fund mobilisation, easy access, risk sharing, capital formation, price determination,
liquidity, reduction of transaction costs etc. International financial markets are beneficial for all
the investors as well as firms because when the cost of the share will be low then it may attract
large number of investors (Ahelegbey, 2016). Apart from this, these markets also offer
opportunities for risk sharing to the investors. Present report is based upon international financial
markets and econometrics. This assignment covers various topics such as exchange rate
volatility, risks in the international transactions, hedging, forward and future contracts,
examination of the level of informational efficiency of the London stock exchange market,
implication of empirical investigation etc. Additionally, critical examination of the way in which
recent interest rate policy and quantitative easing operations via short-term international money
markets have impacted international markets and stock price are also covered in this report.
QUESTION 1
a. Critical discussion of the main causes of the exchange rate volatility in the foreign exchange
markets
Exchange rate volatility could be described as the risk which is associated with
movements in exchange rate which are unexpected. Some of the main economic fundamentals
like interest and inflation rates play major role in it. In other words, it could be defined as the rate
at which currency of one country is converted in to currency of another country. The rapid
changes or fluctuations in the exchange rates are known as their volatility. When the investors
will be planning to invest in a new country or willing to exchange their currency into another one
1

then it will be very important for them to be aware of volatility in the exchange rate. It can help
them to make appropriate decisions for investment. It may have positive impact on the liquidity
conditions in the money market (Anh, Kreinovich and Thach, 2017). In order to analyse the spot
exchange rate of pound to dollar following chart could be analysed:
(Illustration 1: (Spot exchange rate British Pound to US Dollar, 2020)
(Source: Spot exchange rate British Pound to US Dollar, 2020)
From the above chart it could be analysed that the spot exchange rate of GBP to Dollar
was changing continuously since May 2015 to January 2020. In April 2020 it was 1.2377 and in
March the lower spot rate was 1.1658 which was the lowest in the history (Spot exchange rate
British Pound to US Dollar, 2020). There are various causes of this fluctuation all of them could
be understood with the help of following discussion:
Inflation rate: When the inflation in the market get changes then it results in changes in
the exchange rates of currencies. As shown in the above chart the spot rate of GBP to dollar is
changing continuously since 2015 so one of the main causes of it is inflation rate. When the
inflation rate of one country will be low then the value of currency of its currency will be
appreciated. Apart from this, in this situation the prices of services and products gets inclined as
a slow rate. On the other hand, the country with high inflation will face lower value of the
currency as compared to the other nations (Barigozzi, Hallin and Soccorsi, 2019).
2

Government debts: It is a type of national or public debt which is owned by the central
government. If a country is having very high government debt then the possibility of acquiring
foreign capital of the same will be low which will lead to inflation. In opposite situation the
foreign investment will be very high and it is the cause of exchange rate volatility of GBP to
dollar because the government debt in UK is very low (Causes of changes in the exchange rate
volatility, 2020).
Interest rates: It is also a cause which has affected the spot exchange rate of pound.
When the interest rate gets changed then it affects the dollar exchange rate as well se the
currency value. There are various rates such as inflation, forex and interest and all of them are
correlated. When the interest rate increases then it enhances the value of currency because it
provides higher rates to the lenders. It also results in attraction of more and more foreign
investors that results in increased exchange rate.
Balance of payment of current account of the nation: Current account of a country is
mainly used for the purpose of reflecting the balance of trade and earnings on the foreign
investment. Due to this, the spot rate of GBP to dollar got changes during the years 2015 to
2020. All the transactions including imports, export and debt are included in it. If there will be
deficit in the current account or balance of payment of the country then it may result in decreased
value of the currency.
Recession: It is one of the major factors which results in exchange rate volatility and it
has also resulted in changes in the spot exchange rate of GBP to dollar. If the country is dealing
with recession then the interest rate will be very low and the change of acquiring the foreign
investment will also get decreased. Therefore, it is the common cause of decreased spot rate of
the currency.
Speculation: When it is expected that the value of currency of a country will rise then the
demand of investors for the same will be increased so that they can make higher profits of it. Due
to this, the value of the currency will also be increased with higher demand and it enhances the
exchange rate which is a cause of changes in spot exchange rate of GBP to dollar as reflected in
the chart (Barnett and Sergi, 2018).
Volatility in exchange rate may result in various impacts upon the trade. When there will
be higher risk with it then it will increase the transaction costs which will reduce the gain from
the international trade activities because the interest of investors will get decreased due to this. It
3

also leaves impact upon the growth of the country. When the volatility will be low then the
possibility of international trade gains will be low as the exchange rate in this situation will be
very low. On the other hand, if the volatility will be high then it will increase the gain from the
international trade which attracts more and more foreign capital.
b. Explanation of the nature of potential risks in international transactions and critical discussion
of the way in which international traders might manage the risks in derivative market
International transactions could be defined as the purchase or sales of different types of
securities, financial assets etc. that are traded for the purpose of earning higher returns. There are
various types of risks that may affect the international transaction. All of them are as follows:
Commercial risks: One of the common risks is commercial risk that exist in the domestic
as well as international market but the impact of it is very high in the international market as
compared to the domestic. The changes in the trades that are make in the global market place are
difficult to anticipate and hazardous. Acceptability and suitability of the product international
market is very hard to gauge. Apart from this, the changes in supply and demand of the securities
in the market are also unpredictable which also enhances the possibility of commercial risk
(Nature of risk in the international transactions, 2019).
Political risk: When the political situation of the importing or exporting countries will be
changed then this type of risk may take place. The key factors which may result in such risks are
changes in the ruling party, civil wars, rebellions, capture of cargo by the enemies etc.
Legal risks: These are the main risks which may take place due to foreign laws. If the
rules and regulations regarding foreign trade are changed by the legal authorities of importing or
exporting countries then it may result in huge risk for the trade. The investors will take low
interest in such situations because of the expensive nature of the legal proceedings.
For all the international trades it is very important to manage all the above described risks
via derivative markets. For this purpose, exposures arising between the liabilities and assets
could be analysed which could be overlaid using a derivative. These are mainly used to hedge
the unrewarded risks in the interest rates which provides greater flexibility in the asset allocation.
By using derivatives investors, municipalities and investors can transfer the risks and rewards
that are associated with the financial and commercial outcomes of the other parties (Belke,
Dubova and Osowski, 2018).
4

It is very important for the firms to use hedging of net payable and receivables rather than
future or forward contracts. Some of the main benefits of it are as follows:
 With the help of hedging of net payable and receivable the investor will be able to expose
the money to the risks of fluctuations in different financial prices that are interest rate,
commodity price, forex rate etc. When future and forward contracts will be used by the
hedger the risk with the exchange rate fluctuations could be determined and eliminate the
risk of loss from the unfavourable movements in the market.
 If hedging will be used then it will be very easy for the firm to exercise the options upon
observing the realised future exchanger rate. On the other hand, if future or forward
contracts will be used then the hedger may have to suffer (Chen, 2018).
If a firm will use currency option as opposed to the forward contract for the purpose of
hedging then following advantages and disadvantages could be faced:
Advantages: All the benefits of selecting the currency options are as follows:
 All the currency options are very cheap to trade so the investor will have to pay very low
cost for hedging while using currency option.
 When the investor will select the currency option for hedging then all of them are
available on or off exchange which will be beneficial in long run.
 The potential returns in currency options are very high as compared to the risks
associated with them (Advantages and disadvantages of currency options, 2020).
 There are various strategies to speculate on volatility and price movements.
Disadvantages: Some of the drawbacks of selecting the currency options for hedging
purpose are as follows:
 The investor hedging through currency option may have to face the issues because
currency options could be illiquid.
 When the currency option will be adopted by the seller then the risk will be unlimited for
that party as it provides huge returns to the buyers.
 Currency options may quickly become worthless which may affect the actual earnings of
the investor.
5

QUESTION 2
Carrying out the financial econometrics investigation to critical examine the level of
informational efficiency of the London Stock Exchange market
Financial econometrics could be defined as the application of various types of statistical
models in the data of financial market. It I a branch of financial economics which includes the
study of capital market, corporate finance and governance, financial institutions etc. It has huge
impact upon the structure and formulation of the global financial markets. With the help of it, the
growth and innovation in an industry could be promoted which is very important for the
optimum allocation of risk and capital. With the help of it, existing hypotheses of the economy
are analysed and then it is used to forecast the historical data and future trends. When the
econometrics are applied to the finance related problems then these are known as financial
econometrics so that solutions for the issues could be figured out. There are various types of
financial econometrics models which could be used for the purpose of conducting the
investigation (Chen and Jin, 2020). Description of all of them is as follows:
Analysis of high frequency price observations: It is one of the main and commonly used
model of financial econometrics investigations. With the help of it, financial analysis of high
frequency trading could be conducted. When the data is high frequency then it provides intraday
observations that could be used to understand the behaviour of the market. Apart from this, it
could also be used to analyse the micro structure and dynamics of the market. It helps to
determine that the stock prices that are provided by LSE are efficient or not because it provides
proper understanding of the changes in the share price index.
Arbitrage pricing theory: It is a model which is used in the asset pricing and it was
developed by Stephen Ross. It holds that the estimated return of an asset could be modelled as
the linear function of different types of theoretical market indices or the factors. It could be used
in case of changes in all the factors which is represented by beta coefficient. When it is used for
the purpose of analysis of prices index it helps to analyse the linear relationship of the factors.
When it is not possible to use capital asset pricing model then it could be used as it is an
alternative for the same theory (Chow, 2018).
Asset price dynamics: This model specifies different types of statements that are having
proper detail to specify the probability distribution of future prices of an asset. When it is used
then such elements are used which are empirically credible and able to explain the historical
6

prices that are already analysed by the investors. All the dynamics that are used in this model for
the purpose of conducting the investigation are focused with finance theory and statistical
evidences. When it will be used then it could be analysed that the source which is used to gather
the information of share price index is effectively informative or not.
Optimal price dynamics: It Is a model which is used for the purpose of analysing the
price discrimination so that it could be analysed that the buyer of security is able to pay the
amount for the security which was expected previously. With the help of it, the level at which the
profit could be maximised could be analysed. It can also be used for the purpose of analysing
that the information which is used from a trusted source is able informative enough to make any
type of judgement for future or not (Eleftheriou and Patsoulis, 2020).
Cointegration: It is a financial econometrics method which is used for the purpose of
finding the correlation between the long-term time series processes. It was developed in year
1987 by Clive Granger and Nobel Laureated Robert Engle. Some of the most popular tests of
this method are Johnsen test, Phillips Ouliaris Test and Engle Granger Test. With the help of all
of them, the arbitrager can analyse that the source of data which is used to gather information of
price index is able to meet the expectations and it is informative enough or not. It is also known
as the long-term relationship between the variables that are analysed for the purpose of
investigation.
Event study: It is a type of empirical analysis which is conducted for a security traded in
the financial market. With the help of it, impact of the contingent event or the significant catalyst
occurrence could be analysed. All the event studies that are conducted for analysing the share
price indexes are able to reveal the essential data about the way in which the security will react to
the given event. When it will be used for making sure that the information used from the source
for assessment of financial econometrics investigation is effective or not then it may guide to
formulate the right decision (Ficici, 2018).
Autoregressive conditional heteroskedasticity: It is a non-linear model which is used in
the financial econometric investigation. It is a tie series statistical method applied for the purpose
of analysing the impacts that are left by the unexplained models of econometrics. When it is used
then the users can determine the error term which is the residual result left unexplained by the
model. With the help of it, variance of current error could be determined so that it could be
analysed that the information which is used for gathering the results is accurate or not.
7

From all the above described models of financial econometric investigation the first
model which is Analysis of high frequency price observations will be used to analyse that LSE
(London Stock Exchange) is effectively informative or not. For the purpose of analysis of the
pricing index the three companies that are selected are Fresnillo Plc, Avast Plc and Poly Metal
International Plc. All these companies are listed on London Stock Exchange. In order to conduct
the investigation and apply the model of Analysis of high frequency price observations
following charts are generated for pricing index of all the companies:
Fresnillo Plc:
Year Price index
May 2018 1308.5
May 2019 768
May 2020 809.4
The above chart shows that the price index of Fresnillo Plc is very high for 2018 which
was decreased in year 2019 and it was again increased in 2020. It shows that there is a huge
difference in the price index of the organisation between 2018 to 2020. The data is gathered from
London Stock Exchange which shows that the website was informative because the information
was available for various years (Price index of Fresnillo Plc, 2020).
Avast Plc:
Year Price index
May 2018 220
8

May 2019 309
May 2020 503
The above chart shows the changes in the price index of Avast Plc. It shows that the price
index of the organisation is following the increasing trend. In year 2018 it was 220 which was
increased in 2019 up to 309 and again increased in 2020 up to 503. The website of London Stock
exchange was not efficiently informative for this company because the information was only
available for three years from 2018 to 2020. There is no information available for years before
2018 (Price index of AVAST Plc, 2020).
Poly Metal International Plc:
Year Price index
May 2018 684.8
May 2019 850
May 2020 1627
9

From the above chart it has been analysed that the price index of Poly Metal International
Plc is increasing continuously since 2018. The chart is showing that for 2018 the price index was
684.8, which was increased in 2019 up to 850. In 2020 the price index is 1627 which is very high
as compared to the last few years. Apart from this, by using the Analysis of high frequency price
observations it has been analysed that the website of London Stock Exchange was efficiently
informative because the information available on the website is very vast (Price index of Poly
Metal International Plc, 2020).
On the basis of above analysis, it has been determined that the level of informational
efficient of the London Stock Exchange is moderate. The main reason for this is that the market
is not able to provide detailed information of more than 3 years for various companies. One of
the companies is AVAST Plc (Hu, Liu and Wang, 2019). While using Analysis of high
frequency price observations it was analysed that the website of LSE is only providing details
from year 2018 to 2020 for AVAST but on the other hand it is providing detailed information of
other companies. It was the main reason for the moderate level of informational efficiency of
LSE market. From the financial econometric investigation, it has been analysed that the London
stock exchange market is moderately informative in context of the price index information of
different companies.
10

QUESTION 3
Critical examination of the way in which recent interest rate policy and quantitative easing
operations via short term international money markets have impacted international capital
markets and stock prices
Interest rate policy could be defined as the policy which is formulated by the legal
authorities of a country for the purpose of controlling the security market. It is formed by the
monetary authority of the central bank so that it can influence the evolution of different types of
monetary variables in the economy. These variables are exchange rate, credit expansion,
consumer produces etc. All the countries have their own interest rate policy which is formed by
the central bank of the nation. With the help of it the investors can determine the level of rest for
the interest rate in the economy (Hu and Oxley, 2018). There are several banks which are taking
money for central banks and then they offer various types of financial products to the clients on a
predetermine interest rate which is decided under the interest rate policy. Some of the specific
rates that are focused while developing it are repurchase rate of different maturities, overnight
lending rate, discount rate etc. It is used by central banks for the purpose of performing
expansive or contractive monetary policy. According to this policy is the interest rates will be
increased then it reflects the depreciation in the currency value, curbing of inflation, outflow of
capital and excessive credit growth. If the interest rate will be cut then it will be very easy for the
central bank to find ways to boost the economic growth. In this situation different aspects are
analysed by the central authorities. These are fostering credit expansion, currency depreciation so
that competitive advantage could be acquired. The following table shows interest rate of some of
the countries for last five years from 2015 to 2019:
11

(Illustration 3: New interest rate policy of UK, 2020)
(Source: New interest rate policy of UK, 2020)
The above table is showing changes in the interest rate data of United Kingdom and other
countries. In 2015 the interest rate was 0.50 and in 2016 it was 0.25 which was decreased as
compared to the previous year. In 2017 it was 0.50 and increased in 2018 up to 0.75 and remain
constant for 2019 (Interest rates of countries for past few years, 2019).
Quantitative easing is a type of unconventional monetary policy which is used by the
central banks of the nations for the purpose of purchasing the long-term securities from open
market. With the help of it, supply of money could be increased and the cost of the same could
be decreased. Main purpose of it is to enhance the GDP and provide growth to economy. When
the quantitative easing will be increased then it can also enhance the lending and investment
12

within the country because it will inspire the investors to make more and more investors because
of supply of money (Index, 2019). As the UK’s economy is facing huge decrement and lower
growth so it could be used by the bank of England to buy existing bonds of government. With
the help of it the money will directly pumped in the financial system. It is mostly used for the
purpose of stimulating the spending in the economy when the interest rates are not able to
respond positively. With the help of it, the central banks of the countries can try to prevent
inflation. Apart from this, it also plays a role in making decrement in unemployment as well as
offering stimulus to the fragile economy.
The Monetary Policy Committee of Bank of England of UK formulated new interest rate
and quantitative easing policy so that the GDP could be increased and the growth of economy
could be enhanced. Various announcements were made and different decisions were taken by the
central bank so that the country can overcome the economic crisis (Index, 2018). All the steps
and actions that were taken by the legal authorities of the country are as follows:
The central bank of UK is Bank of England and the monetary policy committee of it
decided to cut the interest rate from 0.25 to 0.1% on 19th of March 2020. On the second
declaration the committee decided to keep the interest rate unchanged which is 0.1% and this
decision was made on 18th June 2020. Apart from this the quantitative easing of it which is also
known as bond buying programme was enhanced from 100 billion pounds to 745 billion pounds
which was the huge change in the policy. According to the forecasting of bank the GDP was
decreased by 3% in the first quarter of 2020 and it was the main reason due to which these
changes were proposed by the central bank of UK (Kadilli, 2016). The following chart is
showing the changes in the interest rate of UK for last few years:
13

(Illustration 4: New interest rate policy of UK, 2020)
(Source: New interest rate policy of UK, 2020)
According to the chart the interest rate of UK is the lowest in 2020 which is 0.1%. In
order to support the economy the monetary policy committee announced that there will be an
expansion of 200 billion pounds in quantitative easing on 19th March 2020. This announcement
was made for the purpose of proper functioning of the bond market. In 2019 the interest rate was
0.75% which was reduced to 0.25% by cutting it 0.50%. On the same date the committee also
announced that the various schemes will be designed so that cheap loans could be provided to the
banks (New interest rate policy of UK, 2020). It will help them to have additional capacity to
loan amount to the businesses. There are various impacts of these actions that were taken by the
monetary policy committee of United Kingdom. All of them are as follows:
 As the interest rate in UK is decreased by the monetary policy committee so it will result
in cheaper money borrowing for the borrowers. It will also encourage the business as
well as consumer spending and investments which will also help to enhance the asset
prices in the country (Leblebicioglu and Valcarcel, 2018).
 The lower interest of UK can also lead to some of the issues that are liquidity traps and
inflation which results in undermining of the effective of the low rates.
 Slight changes in the interest rates may result in ripple effects on the economy and its
growth. The interest rate in year 2019 was 0.75 which was decreased up to 0.10 in June
2020. It is a huge change which was made by the monetary policy committee of UK
because the economy was facing decrement continuously. This decision was taken to
enhance the GDP and develop the economy (Lee, 2020).
 With the help of new interest rate policy of UK, the new lending facility will be run by
the central bank of United Kingdom which is Bank of England. With the help of it loans
to the larger business will be provided which will also lead the economy towards growth.
 In the new interest rate policy, it was announced by the chancellor that the legal
authorities will lend up to 330 billion pounds to the large business so that they can carry
out all their businesses in systematic manner and develop the economy. It shows that the
new policy will leave positive impacts upon the economy of UK (Linton, 2019).
 The decision of expansion of quantitative easing was also made and the amount which
will be used for this purpose will be around 200 billion pounds. With the help of this
14

change the bond market will be able to function in systematic manner and it will support
the economy which is a positive impact of new quantitative easing policy. When the QE
will be increased then stock market become bullish which increases share prices and
provide growth to the capital market.
 In may 2020 the GDP of UK was fallen by 3% and to deal with it the Monetary policy
Committee of Bank of England announced that the bond buying programme will be
increased by 100 to 745 billion so that the GDP could be enhanced (Raczko, 2016).
 By increasing the QE central government of UK will increase the supply of money
through governmental binds and various other securities like them. When the supply of
money will be increased in UK then it will result in lower cost of funds that enhances
investments and provide growth to the economy. With the help of it, stock prices could
be enhanced which will leave positive impacts upon the capital market of UK. As the
decision of increasing the QE is taken by the MPC so it will result in increased
investments because of higher supply of money and it will also provide growth to the
economy by increasing stock prices (Utami, Trinugroho and Sergi, 2019).
 Lower banks rates provide opportunities to bank to lend funds with easier terms. When
the cost of money will be lower due to higher supply of money then the interest rate will
be decreased. It can help United Kingdom to enhance the flow of money because the QE
will be increased and interest rates will be decreased according to the new interest rate
policy of Monetary Policy Committee of Bank of England.
From the above discussion it has been determined that the new interest rate and
quantitative easing will be beneficial for United Kingdom as well as its capital market because
there will be various positive implications of it. With the help of it flow and supply of money
will be increased, stock prices will be inclined cost of money will be decreased, investments will
be enhanced, loan could be provided with easy terms. All these implications of it will help the
country to increase the GDP and grow the capital market which is decreasing since past few
months (Yan and Nettayanun, 2019).
CONCLUSION
From the above project report it has been concluded that international currency market is
the largest financial market at global level where the average trading of five dollar trillion is
performed on daily basis. There are various types of assets that are traded in this market. These
15

are stocks, bonds, shares etc. It is very important for all the companies that are trading their
shares to make sure that they are listed on a stock exchange as it is vital for trading purpose.
When exchange rate of a country changes then it may leave negative as well as positive impacts
upon the economy. For the purpose of ignoring negative implications of it, it is very important to
be aware of different elements that are resulting in exchange rate volatility. All of them are
inflation rate, government debts, interest rates, recession, speculation etc. By keeping detailed
information of all of them it will be very easy for the governmental bodies of country to control
the volatility. Some of the risks that are related to the international transactions are commercial,
legal etc. There are various types methods which could be used for the purpose of conducting
financial investigations different models could be used. These are analysis of high frequency,
price observations, arbitrage pricing theory, asset price dynamics, optimal price dynamics,
cointegration, event study, autoregressive conditional heteroskedasticity etc. There are various
types of elements that may leave impacts upon the capital market and the stock price of a
country. The two of them are the interest rate and quantitative easing policy. When changes in
them are made by the legal authorities then it may result in changes in the stock price and it may
directly impact the capital market.
16

REFERENCES
Books and Journals:
Ahelegbey, D. F., 2016. The econometrics of Bayesian graphical models: a review with financial
application. Journal of Network Theory in Finance. 2(2). pp.1-33.
Anh, L. H., Kreinovich, V. and Thach, N. N. eds., 2017. Econometrics for financial
applications (Vol. 760). Springer.
Barigozzi, M., Hallin, M. and Soccorsi, S., 2019. Identification of global and local shocks in
international financial markets via general dynamic factor models. Journal of Financial
Econometrics. 17(3). pp.462-494.
Barnett, W. A. and Sergi, B. S., 2018. Introduction', Banking and Finance Issues in Emerging
Markets (International Symposia in Economic Theory and Econometrics, Volume
25) (pp. 1-8). Emerald Publishing Limited.
Belke, A., Dubova, I. and Osowski, T., 2018. Policy uncertainty and international financial
markets: the case of Brexit. Applied Economics. 50(34-35). pp.3752-3770.
Chen, K., 2018. Financial Innovation and Technology Firms: A Smart New World with
Machines', Banking and Finance Issues in Emerging Markets (International Symposia in
Economic Theory and Econometrics, Volume 25).
Chen, N. and Jin, X., 2020. Industry risk transmission channels and the spillover effects of
specific determinants in China’s stock market: A spatial econometrics approach. The
North American Journal of Economics and Finance. 52. p.101137.
Chow, W. W., 2018. Stock Market Contagion from a Spatial Perspective', Banking and Finance
Issues in Emerging Markets (International Symposia in Economic Theory and
Econometrics, Volume 25).
Eleftheriou, K. and Patsoulis, P., 2020. COVID-19 Lockdown Intensity and Stock Market
Returns: A Spatial Econometrics Approach.
Ficici, A., 2018. Econometrics analysis and application of event study methodology on
international mergers and acquisition activities of MNCs from Eastern Europe. Journal
of Economic and Social Thought. 5(1). pp.1-8.
Hu, M., Liu, J. and Wang, X., 2019. Consumption Propensity and Entrepreneurship: Evidence
from China', Asia-Pacific Contemporary Finance and Development (International
Symposia in Economic Theory and Econometrics, Volume 26).
Hu, Y. and Oxley, L., 2018. Do 18th century ‘bubbles’ survive the scrutiny of 21st century time
series econometrics?. Economics Letters. 162. pp.131-134.
Index, A. P. C. F., 2019. Development (International Symposia in Economic Theory and
Econometrics, Volume 26).
Index, B., 2018. Finance Issues in Emerging Markets (International Symposia in Economic
Theory and Econometrics, Volume 25).
Kadilli, A., 2016. Essays in financial econometrics (Doctoral dissertation, University of
Geneva).
Leblebicioglu, A. and Valcarcel, V. J., 2018. An International Perspective on the Loan Puzzle in
Emerging Markets☆', Banking and Finance Issues in Emerging Markets (International
Symposia in Economic Theory and Econometrics, Volume 25).
Lee, C. F., 2020. Financial econometrics, mathematics, statistics, and financial technology: an
overall view. Review of Quantitative Finance and Accounting. 54(4). pp.1529-1578.
Linton, O., 2019. Financial Econometrics. Cambridge University Press.
17

Raczko, M., 2016. Essays in international finance and applied econometrics (Doctoral
dissertation).
Utami, D. E., Trinugroho, I. and Sergi, B. S., 2019. What Determines Sukuk Issuance Type in
Indonesia?', Asia-Pacific Contemporary Finance and Development (International
Symposia in Economic Theory and Econometrics, Volume 26).
Yan, Y. and Nettayanun, S., 2019. Strategic Risk Management in the Chinese Property and
Casualty Insurance Industry', Asia-Pacific Contemporary Finance and Development
(International Symposia in Economic Theory and Econometrics, Volume 26).
Online
Spot exchange rate British Pound to US Dollar. 2020. [Online]. Available through:
<https://www.poundsterlinglive.com/bank-of-england-spot/historical-spot-exchange-
rates/gbp/GBP-to-USD>
Causes of changes in the exchange rate volatility. 2020. [Online]. Available through:
<https://www.compareremit.com/money-transfer-guide/key-factors-affecting-currency-
exchange-rates/>
Nature of risk in the international transactions. 2019. [Online]. Available through:
<https://howtoexportimport.com/Types-of-risks-in-International-Trade-
4433.aspx#:~:text=Nature%20of%20Risk%20different%20in%20International
%20Trade&text=The%20changes%20in%20international%20market,supply
%20conditions%20are%20more%20unpredictable.>
Advantages and disadvantages of currency options. 2020. [Online]. Available through:
<https://goodmoneyguide.com/advantages-and-disadvantages-of-option-contracts/>.
Interest rates of countries for past few years. 2019. [Online]. Available through:
<https://www.focus-economics.com/economic-indicator/policy-interest-
rate#:~:text=The%20policy%20interest%20rate%20is,credit%20expansion%2C
%20among%20others).&text=Different%20countries%20have%20different%20policy
%20interest%20rates.>
New interest rate policy of UK. 2020. [Online]. Available through:
<https://commonslibrary.parliament.uk/research-briefings/sn02802/#:~:text=UK
%20(Bank%20of%20England),%C2%A3100bn%20to%20%C2%A3745bn.&text=On
%2019%20March%2C%20the%20MPC,lowest%20they%20have%20ever%20been.>
Price index of Fresnillo Plc. 2020. [Online]. Available through:
<https://www.londonstockexchange.com/stock/FRES/fresnillo-plc/company-page>
Price index of AVAST Plc. 2020. [Online]. Available through:
<https://www.londonstockexchange.com/stock/AVST/avast-plc/company-page>
Price index of Poly Metal International Plc. 2020. [Online]. Available through:
<https://www.londonstockexchange.com/stock/POLY/polymetal-international-plc/
company-page>
18