What question did this study set out to answer?

The aim is to explore the dynamics of price jumps in foreign exchange markets using a quantile frequency approach.

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April 12, 2026Open Access

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

Key Points

The aim is to explore the dynamics of price jumps in foreign exchange markets using a quantile frequency approach.
Analyzed daily FX market data over a 20-year period.
Focused on currency pairs: EUR/USD, GBP/USD, USD/CAD, and USD/JPY.
Employed a quantile vector autoregressive (QVAR) model and frequency connectedness framework.
Identified increased interconnectedness of price jumps during tumultuous periods.
Noted that spillover effects were stronger in the short term, especially at extreme ends of the distribution.
Observed heterogeneity in total connectedness indices across different quantiles.

Abstract

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.

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