Market-based measures of convergence in European emerging countries during the financial crisis
The article presents measures of convergence that can be implied from the prices of instruments quoted on the financialmarket. Investors pricing off-balance instruments on the derivativesmarket reveal their sentiment and level of confidence related to the stability and development of the local market. Author proposes the following measures of convergence observed both on interest rate and currency market: convergence (forward) spread, basis swap, asset swap, credit default swap, zero-delta straddle, risk reversal, butterfly and currency spread. The financial crises of 2008–10 brought deconvergence processes visible not only on emerging markets but also in some developed eurozone countries. The presented derivative instruments offer valuable information for all market analysts showing the level of convergence perceived by active market participants.
Katedra Rynków i Instytucji Finansowych, Szkoła Główna Handlowa
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