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Financial convergence on emerging markets: the case of CEE countries

Author

Listed:
  • Michał Fronc

    (Warsaw School of Economics, Collegium of Management and Finance)

  • Piotr Mielus

    (Warsaw School of Economics, Collegium of Economic Analysis)

Abstract

This paper investigates information embedded in the most liquid derivative instruments regarding the scope of convergence reported on the financial market in the emerging CEE countries. We present a proposal of the index that measures the scale of convergence between local and global derivative prices. The financial convergence index (FCI) encompasses a basket of prices that are remarkable for evaluation of the current state of converging economies. The study covers OTC foreign exchange and interest rate markets, as these segments are the most liquid areas of emerging markets. Moreover, we analyse the connection between derivatives pricing and broad market equity indices. The index provides evidence of a divergence process observed in the course of the financial crisis and presents a similar pattern to equity benchmarks.

Suggested Citation

  • Michał Fronc & Piotr Mielus, 2017. "Financial convergence on emerging markets: the case of CEE countries," Bank i Kredyt, Narodowy Bank Polski, vol. 48(2), pages 149-172.
    • Handle: RePEc:nbp:nbpbik:v:48:y:2017:i:2:p:149-172
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    Cited by:

    1. Tihana Škrinjarić, 2019. "Stock Market Reactions to Brexit: Case of Selected CEE and SEE Stock Markets," IJFS, MDPI, vol. 7(1), pages 1-14, January.

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    More about this item

    Keywords

    financial convergence; CEE derivative markets; financial crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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