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Theorizing International Trade pp 351–384Cite as

Palgrave Macmillan

An Analysis of Dynamic Spillover in India’s Forex Derivatives Markets

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Abstract

This chapter uses multivariate GARCH models to study volatility spillovers in foreign exchange markets. The study is based on daily data of futures and spot of four exchange rates viz., EURO/INR, GBP/INR, USD/INR and JPY/INR, traded on NSE and MCX-SX for the period February 2010 to November 2014. The main objective is to examine the dynamic spillover in India’s forex derivatives markets. The study suggests that the static spillover analysis explicitly categorizes the sample exchange rates into net transmitters and net receivers. The dynamic spillover analysis shows periods wherein the roles of emitters and recipients of return and volatility spillovers can be interrupted or even reversed. Thus, even if some commonalities appear in each identified category of exchange rates, such commonalities are event specific and time dependent.

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Notes

  1. 1.

    The figures are converted in terms of dollars by taking the exchange rate of USD as on 28 February 2014.

  2. 2.

    The percentage is calculated by authors of the SEBI Handbook of Statistics by compiling the trading data of MCX-SX, NSE and USE.

  3. 3.

    Considering the standard average exchange rate mark of ₹ 48/USD, the rupee has depreciated by about 30% as on 28 February 2014.

  4. 4.

    VAR order is selected based on the Schwartz Bayesian criterion (SBC).

  5. 5.

    Figures are available with the authors upon request.

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Author information

Authors and Affiliations

  1. Department of Economic Sciences, Indian Institute of Technology Kanpur, Kanpur, India

    Wasim Ahmad

  2. Department of Economics, Aligarh Muslim University, Aligarh, India

    Shirin Rais

  3. Guru Gobind Singh Indraprastha University, Delhi, India

    Ritesh Kumar Mishra

Authors
  1. Wasim Ahmad
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  2. Shirin Rais
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  3. Ritesh Kumar Mishra
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Editor information

Editors and Affiliations

  1. Indian Institute of Technology Kanpur, Kanpur, India

    Somesh K. Mathur

  2. Consumer Unity & Trust Society (CUTS) International, Jaipur, India

    Rahul Arora

  3. Consumer Unity & Trust Society (CUTS) International, Jaipur, India

    Sarbjit Singh

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Ahmad, W., Rais, S., Mishra, R.K. (2017). An Analysis of Dynamic Spillover in India’s Forex Derivatives Markets. In: Mathur, S., Arora, R., Singh, S. (eds) Theorizing International Trade. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-1759-9_15

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  • DOI: https://doi.org/10.1007/978-981-10-1759-9_15

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  • Online ISBN: 978-981-10-1759-9

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