The Relationship Between Spot Exchange Rate and Forward Exchange Rate

• Main Authors: Liau-Yu Cheng, 廖育成
• Other Authors: Jiann-Liang Chiu
• Format: Others
• Language: zh-TW
• Published: 2001
• Online Access: http://ndltd.ncl.edu.tw/handle/26165122566416876473

碩士 === 淡江大學 === 財務金融學系 === 89 === Title of Thesis : The Relationship Between Spot Exchange Rate Total Pages:98 and Forward Exchange Rate Name of Institute : Graduate Institute of Money, Banking and Finance,Tamkang University,Graduate Date : June 2001 Degree Conferred : MasterName of Student : Liau-Yu Cheng Advisor : Dr. Jiann-Liang Chiu 廖 育 成 邱 建 良Abstract：This purpose of this study is to examine the relationship between spot exchange rate and forward exchange rate among nine countries (Canada, United Kingdom, French, Italy, Germany, Japan, Singapore , Hong Kong, and Taiwan). The relationship we try to know is as below: does long-run relationship exist between spot rate and forward rate (foreign exchange market efficiency hypothesis), how is the causality relationship between spot rate and forward rate (lead-follow relationship), how is the impulse response influence in spot and forward exchange market.Using GARCH model and Johansen cointegration model, we have some conclusions. First, finding of a cointegration vector for each eight countries indicates that there is a long-run relationship between spot rate and forward rate. However, only five countries exchange markets are efficient. Second, from one variable GARCH-AR(1) model and two variable GARCH-IRF model, we find the same results: there is a feedback causality relationship between spot rate and forward rate, that means they influence each other. Third, from the analysis of the impulse response function, we find the impulse almost is a persistent effect and converge to the degree of zero at day2 or day3.