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    Internal audit of foreign exchange operations : a research report presented in partial fulfilment of the requirements for the degree of Masters of Business Studies at Massey University
    (Massey University, 1989) Mathews, Clive M. H
    Foreign exchange operations involve complex economic. political, technical and financial factors. Due to these complexities and the rapid deregulation of the New Zealand financial markets in recent years, there is a real danger that foreign exchange operations maybe mismanaged leading to major losses. A recent New Zealand survey by Deloitte Haskins and Sells on treasury operations, which include foreign exchange activities, as reported by the National Business Review stated: ... many organisations which had moved to manage financial risks by establishing treasury functions had done so without fully understanding the implications of mismanaging that function. This had led to spectacular and well publicised losses such as the 483 million marks Volkswagon lost through unauthorised dealing. (MacLennan, 1989, p.14) This illustrates the magnitude of financial loss that can occur through mismanagement of treasury and, similarly, foreign exchange operations. A specific dollar amount for the total value of foreign exchange operations in New Zealand is not available1, 1. (Discussions with the Department of Statistics, Massey University's Economics Department and Mr B.H. Doyle from the Rural Bank determined that no actual figure was available due to the difficulties in establishing a basis for measurement.) but it runs into many billions of dollars. The research described in this paper addressed issues relating to the internal auditing of Foreign Exchange (FX) operations. As indicated above, foreign exchange operations carry high risk of loss due to the complexity of the factors involved. The primary objective of this research was to identify the seriousness of risks and appropriate management controls to deal with those risks. To achieve this two subobjectives were formulated. Firstly, all possible risks had to be identified, both from a normative and practical perspective. Secondly, the identification of all types of management controls theoretically appropriate and/or actually used to eliminate or reduce risk. This research is likely to be particularly relevant in an Australasian context because of the high dependency of local economies on the export and import of goods and services invoking millions of dollars of foreign exchange being handled each working day. Within New Zealand the deregulation of the financial markets, since 1984, has led to greater exposure to currency fluctuations, with the management controls to eliminate or reduce risk consequently becoming of greater importance.
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    Foreign exchange rate regimes and the Asian currency crisis : a thesis presented in partial fulfilment of the requirements for the degree of Master of Business Studies in Economics at Massey University
    (Massey University, 1999) Lan, Yuping
    This thesis is a study on the Asian currency crisis. It starts with a review of the theories on foreign exchange rate regimes and their adjustment mechanisms. The monetary approach of foreign exchange rate is discussed and used as a framework in analyzing on the origins and causes of the currency crisis, which started in East Asia in mid 1997. A lot of statistical data are used in the analysis on the crisis-hit countries in terms of prices, interest rates, external competitiveness, foreign exchange rates of major currencies and the flow of foreign capital and so on. It is found that the main origins and causes of the Asian currency crisis are from the deterioration of external competitiveness and the misuse of foreign capital and bad supervision of the domestic financial markets. The characteristics of a pegged exchange rate regime has proved to be too rigid to reflect the changes in the fundamentals of the economy and has been responsible for the accumulative inconsistencies leading to the collapse of the regime. The Asian currency crisis indicates that in the present world in which economic globalization has become a mainstream trend, it is getting more difficult to maintain a pegged exchange rate regime. The Asian currency crisis also reflects the importance of the establishment of a sound financial sector and good supervisory and governing abilities of the government when liberalizing its domestic financial market, especially on the opening of the domestic capital market. A rush of financial liberalization would likely generate vulnerabilities to the economic system.
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    Essays on return predictability : a dissertation submitted in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance, Department of Economics and Finance, Massey University
    (Massey University, 2013) Lu, Helen
    This dissertation is a collection of three essays that investigate the momentum effect and the short-run predictability in currency carry trade profits. The first essay investigates whether tail risks of momentum strategies make them unattractive within the context of prospect utility. Momentum returns have strongly asymmetric tail risks and that asymmetric tail risk is precisely what makes momentum strategies unattractive. This study is the first to document the undesirable tail risk characteristics of momentum returns. The second essay uncovers economically significant predictability in carry trade profits from shorting the low-yielding currencies. The monthly world equity index return, monthly changes in currency volatility and monthly changes in equity volatility predict carry trade profits from the short leg two months later, while monthly changes in commodity prices, monthly changes in currency volatility and monthly changes in equity volatility predict carry trade profits from the long leg three months later. Investors could have used the discovered leg-specific predictability to time the market and improve their trading outcomes, instead of staying fully invested or predicting carry trade profits from both legs with a single model. Evidence from two tests conducted in this essay points towards the gradual information diffusion model as the most likely explanation for the discovered predictability, while timevarying risk premia do not seem to explain this effect. The last essay examines return predictability among carry trades, stocks and commodities in a dynamic vector autoregression setting. The predictive effect goes from commodities to stock, from stocks to low-yielding currencies and from commodities to high-yielding currencies. Variables in these markets are more strongly correlated in the high-risk regime than in the low-risk regime. Drops in the world equity index (commodity prices), but not rises, predict decreases in carry trade profits from low-yielding (high-yielding) currencies. Increases in currency volatility, but not decreases, predict drops in carry trade profits from low-yielding currencies. The in- sample asymmetric effects also exist out-of-sample, but these asymmetric prediction models do not consistently deliver better forecasts than symmetric models.