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Dynamic Properties of Foreign Exchange Complex Network

Author

Listed:
  • Xin Yang

    (School of Mathematics and Statistics, Hunan Provincial Key Laboratory of Mathematical Modeling and Analysis in Engineering, Changsha University of Science and Technology, Changsha 410114, China)

  • Shigang Wen

    (School of Mathematics and Statistics, Hunan Provincial Key Laboratory of Mathematical Modeling and Analysis in Engineering, Changsha University of Science and Technology, Changsha 410114, China)

  • Zhifeng Liu

    (School of Management, Hainan University, Haikou 570228, China)

  • Cai Li

    (School of Mathematics and Statistics, Hunan Provincial Key Laboratory of Mathematical Modeling and Analysis in Engineering, Changsha University of Science and Technology, Changsha 410114, China)

  • Chuangxia Huang

    (School of Mathematics and Statistics, Hunan Provincial Key Laboratory of Mathematical Modeling and Analysis in Engineering, Changsha University of Science and Technology, Changsha 410114, China)

Abstract

The foreign exchange (FX) market, one of the important components of the financial market, is a typical complex system. In this paper, by resorting to the complex network method, we use the daily closing prices of 41 FX markets to build the dynamical networks and their minimum spanning tree (MST) maps by virtue of a moving window correlation coefficient. The properties of FX networks are characterized by the normalized tree length, node degree distributions, centrality measures and edge survival ratios. Empirical results show that: (i) the normalized tree length plays a role in identifying crises and is negatively correlated with the market return and volatility; (ii) 83% of FX networks follow power-law node degree distribution, which means that the FX market is a typical heterogeneous market, and a few hub nodes play key roles in the market; (iii) the highest centrality measures reveal that the USD, EUR and CNY are the three most powerful currencies in FX markets; and (iv) the edge survival ratio analysis implies that the FX structure is relatively stable.

Suggested Citation

  • Xin Yang & Shigang Wen & Zhifeng Liu & Cai Li & Chuangxia Huang, 2019. "Dynamic Properties of Foreign Exchange Complex Network," Mathematics, MDPI, vol. 7(9), pages 1-19, September.
    • Handle: RePEc:gam:jmathe:v:7:y:2019:i:9:p:832-:d:265515
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    References listed on IDEAS

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