A global hazard index for the world foreign exchange markets

Arbeitspapier

This paper proposes a forward-looking indicator of risk in the foreign exchange markets calculated from the implied volatilities of currency options according to the Garman-Kohlhagen model. We discuss the properties of such indicator and stress that it is related to a notion of risk that does not coincide with that of Gaussian risk underlying most mainstream models. We postulate that it is associated with a broader definition of risk, which we call hazard in order to avoid confusion. The properties of the Global Hazard Indicator (GHI) are assessed against the background of the market turbulence in 1998. This period has been characterized by abnormal fluctuations in the exchange rate markets spurred by a sequence of shocks in some emerging economies and in South East Asia, which have raised fear of contagion in developed countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1

Classification and Topics

• Classification: Wirtschaft ; Global Outlook ; Foreign Exchange
• Subject: world foreign exchange markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Brousseau, Vincent ; Scacciavillani, Fabio
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/152435
• Last update: 10.03.2025, 11:42 AM CET