Berlin 2018 – wissenschaftliches Programm

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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 2: Financial Markets and Risk Management I

SOE 2.2: Vortrag

Montag, 12. März 2018, 09:45–10:00, MA 001

Information Transmission Channels of the Foreign Exchange Network — •Alexander Becker, Irena Vodenska, and H Eugene Stanley — Boston University, Boston, USA

The foreign exchange market is a network in which the currencies are the nodes and the exchange rate pairs are the edges. While the underlying macroeconomic fundamentals describe the nodes, trading happens on the edges. In an attempt to understand the dynamics of the foreign exchange market, we need to separate the information contained in the nodes from the information in the links.

We use the symbolic performance, describing the appreciation and depreciation of currencies against all other currencies in the market, in other words, the node state, to evaluate the information that is encoded in the edges of the network. We compare the empirical distribution of a pair of nodes with the distribution that arises from a maximum entropy approach. This allows us to quantify the strength of the co-movement of two currencies with respect to the entire market.

We link our results to trading volume of commodities and goods as well as central bank and other political interventions. Our approach allows us to observe the dramatic impact of the capping of the Swiss franc with respect to the euro as well as an decrease in importance of the US dollar with respect to currencies from emerging markets and South East Asia.