Foreign currency exchange network topology across the 2008 credit crisis

• Main Authors: Sharif, Shamshuritawati, Ap, Nuraisah Che, Ruslan, Nuraimi
• Format: Conference Proceeding
• Language: English
• Subjects: Bankruptcy reorganization; Bond issues; Correlation analysis; Currencies; Currency; Currency exchanges; Filtration; Graph theory; Network topologies; Risk exposure; Variation
• ISSN: 0094-243X; 1551-7616
• DOI: 10.1063/1.4983868

A stable world currency exchange rate is a very important aspect to be considered for a developed country, i.e Malaysia. A better understanding about the currencies itself is needed nowadays. This project is about to understanding the fluctuation and to identify the most influential world currencies in the three different cases; before credit crisis, during credit crisis and after credit crisis. A network topology approach is use to examine the interrelationship between currencies based on correlation analysis. With this point of view, those relationships can be measured by a correlation structure among the currencies. The network can be analyse by filtering the important information using minimum spanning tree (MST) and interpret it using degree centrality as the centrality measure. This topology will give a useful guide to understand the behaviour and determine the most influential currency in the network as a part of a complex system. All currencies are compared among the three different cases; before credit crisis, during credit crisis and after credit crisis period. The result of this project shows that Unites State Dollar (USD), Brazilian Real (BRL), United Kingdom Pound (EUR) and Danish Krone (DKK) are the most influential currencies before the credit crisis period. With respect to during the credit crisis, New Zealand Dollar (NZD) dominates the network and it is followed by Singapore Dollar (SGD) for after the credit crisis period.