Price jumps in the FX markets using the quantile frequency VAR connectedness framework

This study examines price jumps in foreign exchange (FX) markets using daily data spanning over 20 years, focusing on the following currency pairs: EUR/USD, GBP/USD, USD/CAD, and USD/JPY. We employ a quantile vector autoregressive (QVAR) model and a frequency connectedness approach to analyze the dynamics of price jumps. Our results reveal increased interconnectedness of price jumps during periods of turmoil, manifested mainly in the short term and at the extreme ends of the distribution. We also observe heterogeneity in the total connectedness indices, with more pronounced spillover effects in the upper end quantile.