Temzelides and Williamson present a model of private currency issuance to study the effect of clearing arrangements on the prices at which private currencies trade, on the volume of exchange, and on welfare. Their findings hinge on three factors: the location of the issuers relative to the area in which their currencies circulate, whether there is an arrangement for clearing nonlocally issued c...

We develop the first basic Operational Risk perspective on key risk management issues associated with the development of new forms of electronic currency in the real economy. In particular, we focus on understanding the development of new risks types and the evolution of current risk types as new components of financial institutions arise to cater for an increasing demand for electronic money, ...

On Jan. 1, 1999 the European Union introduced a common currency Euro (EUR), to become the legal currency in all eleven countries which form the EUR. In order to test the EUR behavior and understand various features, the EUR exchange rate is artificially extrapolated back to 1993 by a linear superposition of the exchange rates of the 11 currencies composing EUR with respect to several currencies...

This paper investigates the interdependence of US dollar exchange rates expressed in other major currencies. Focusing on different phases of the Global financial crisis (GFC) and the Eurozone Sovereign Debt Crisis (ESDC), we adopt a dynamic conditional correlation model into a multivariate Fractionally Integrated Asymmetric Power ARCH (FIAPARCH) framework, during the period 2004–2011. The findi...

The ubiquity of loyalty programs has given rise to a multitude of new currencies (e.g., frequent flier miles, Hilton HHonors points, Diner’s Club “Club Rewards”) that people accrue, save and spend much like traditional paper money. Unlike cash, these alternative currencies are not perfectly fungible. In other words, they are neither universally accepted, nor can they be spent in any increment, ...

The relation between the volatilities of pricing kernels associated with different currencies and the volatility of the exchange rate between the currencies is derived under the assumption of integrated capital markets, and the volatilities of the pricing kernels are related to the foreign exchange risk premium. Time series of pricing kernel volatilities are estimated from panel data on bond yi...

Bitcoins have emerged as a possible competitor to usual currencies, but other crypto-currencies have likewise appeared as competitors to the Bitcoin currency. The expanding market of crypto-currencies now involves capital equivalent to 10 10 US Dollars, providing academia with an unusual opportunity to study the emergence of value. Here we show that the Bitcoin currency in itself is not special...

We study legal and policy issues surrounding crypto currencies, such as Bitcoin, and how those issues interact with technical design options. With an interdisciplinary team, we consider in depth a variety of issues surrounding law, policy, and crypto currencies — such as the physical location where a crypto currency’s value exists for jurisdictional and other purposes, the regulation of anonymo...

We provide novel evidence of priced correlation risk in the foreign exchange market. Currencies that perform badly (well) during periods of high exchange rate correlation have high (low) average returns. We also show that high (low) interest rate currencies have high (low) correlation risk exposure, providing a risk-based justification for the carry trade. To address our empirical findings, we ...

Fundamental laws govern all complex flow systems, including natural ecosystems, economic and financial systems. Natural ecosystems are practical exemplars of sustainability: enduring, vital, adaptive. The sustainability of any complex flow system can be measured with a single metric as an emergent property of its structural diversity and interconnectivity; it requires a balance in emphasis betw...