Increasing Derivatives Market Activity in Emerging Markets and Exchange Rate Exposure

Understanding the effects of off-balance sheet transactions on interest and exchange rate exposures has become more important for emerging market countries that are experiencing remarkable growth in derivatives markets. Using firm level data, we report a significant fall in exposure over the past 10 years and relate this to higher derivatives market participation. Our methodology is composed of a three stage approach: First, we measure foreign exchange exposures using the Adler-Dumas (1984) model. Next, we follow an indirect approach to infer derivatives market participation at the firm level. Finally, we study the relationship between exchange rate exposure and derivatives market participation. Our results show that foreign exchange exposure is negatively related to derivatives market participation, and support the hedging explanation of the exchange rate exposure puzzle. This decline is especially salient in the financial sector, for bigger firms, and over longer time periods. Results are robust to using different exchange rates, a GARCH-SVAR approach to measure exchange rate exposure, and different return horizons.

Fast Algorithms Using Minimal Data Structures for Common Topological Relationships in Large, Irregularly-spaced Topographic Data Sets

Digital terrain models (DTM) typically contain large numbers of postings, from hundreds of thousands to billions. Many algorithms that run on DTMs require topological knowledge of the postings, such as finding nearest neighbors, finding the posting closest to a chosen location, etc. If the postings are arranged irregu- larly, topological information is costly to compute and to store. This paper offers a practical approach to organizing and searching irregularly-space data sets by presenting a collection of efficient algorithms (O(N),O(lgN)) that compute important topological relationships with only a simple supporting data structure. These relationships include finding the postings within a window, locating the posting nearest a point of interest, finding the neighborhood of postings nearest a point of interest, and ordering the neighborhood counter-clockwise. These algorithms depend only on two sorted arrays of two-element tuples, holding a planimetric coordinate and an integer identification number indicating which posting the coordinate belongs to. There is one array for each planimetric coordinate (eastings and northings). These two arrays cost minimal overhead to create and store but permit the data to remain arranged irregularly.