Common Currency Markets Lead to Significant Cross-Correlation Between Regions
Regional financial markets with a common currency have emerged due to globalization. A model was created with two markets using the same currency, populated by different types of investors. By allowing trading between the markets, investors from each market interact and influence price movements. The more stable market initially stabilizes the system but may later become destabilized. The model accurately reflects real financial markets, showing significant cross-correlation between the two markets.