Does CIA occur during financial turbulence?

Hoque, Ariful and Hassan, Kamrul and Krishnamurti, Chandrasekhar (2015) Does CIA occur during financial turbulence? Academy of Taiwan Business Management Review, 11 (1). pp. 18-20. ISSN 1813-0534

Abstract

This study exploits the covered interest arbitrage (CIA) possibility when the European market experienced financial crisis. The deviation of covered interest parity (CIP) test is conducted for the major currencies against the Euro. We find that the CIA opportunity arises for Australian dollar (AUD), Canadian dollar (CAD), and Japanese yen (JPY) in the volatile European financial crisis market. However, the CIA possibility does not exist for the British pound (GBP) and US dollar (USD)during the European financial turbulence. The findings of this study show that the currency market participants, particularly the arbitrageurs can make profit using major currency markets other than GBP and USD when financial turbulence occurred in the Euro zone. It indicates that GBP and USD behave as stable currencies in the context of CIA possibility during financial market disaster.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to published version in accordance with the copyright policy of the publisher.
Faculty / Department / School: Current - Faculty of Business, Education, Law and Arts - School of Commerce
Date Deposited: 27 Apr 2016 23:47
Last Modified: 14 Sep 2017 23:40
Uncontrolled Keywords: financial turbulence; covered interest arbitrage; European financial crisis
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Socio-Economic Objective: E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
URI: http://eprints.usq.edu.au/id/eprint/28338

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