Thesis Defence – Ali Sevim (MSFE)

Ali Sevim - M.Sc. Financial Engineering

Asst. Prof. Dr. Satı Mehmet Özsoy – Advisor

Date: 11.12.2023

Time: 10.30

Location: Özyeğin University Altunizade Campus - Classroom ALT 102

“The Effect of BRSA Decisions on Exchange Rate Expectations”

Asst. Prof. Dr. Satı Mehmet Özsoy, Özyeğin University

Asst. Prof. Dr. Emrah Ahi, Özyeğin University

Asst. Prof. Dr. Ata Can Bertay, Sabancı University

Abstract:

      Risk-neutral distributions (RND) of currency options are useful for predicting the price movements of future exchange rates, valuing financial derivatives, and applying appropriate monetary policy.  This study examines the swap restriction regulations applied by the BRSA to prevent USD/TRY exchange rate shocks after the diplomatic crisis with the USA. These regulations restricted offshore swap transactions in which Turkish banks give foreign currency and receive Turkish Lira to foreign banks at maturity. Risk-neutral distributions (RND) are obtained for all maturities using the non-parametric Malz approach. The RND findings obtained indicate a deterioration in the expectations regarding the USD/TRY exchange rate for all maturities following the swap restrictions. In addition to the visual representation, sharp movements in exchange rate expectations are displayed with moments of RNDs up to the 4th degree. Moreover, the impact capacity of regulatory decisions taken by the BRSA, the moments of RNDs up to the 4th degree, and the relationship between global factors is examined with the established model. The findings indicate that the effect of the regulations is temporary.

Keywords:

       Risk-neutral distributions, Market expectations, Swap transactions, Options, Non- Parametric Malz Approach

Bio:       

        Ali Sevim graduated from the Department of Economics at Middle East Technical University in 2018. He currently works as a researcher at the Markets Analysis Division of the Central Bank of the Republic of Türkiye.