Abstract
This study examines how the Red Sea War (July 21, 2023–January 17, 2024) influenced the volatility and patterns of financial assets like ASEAN-6 exchange rates and crypto currencies such as Bitcoin, Ethereum, and Ripple. The aim is to understand the impact of geopolitical uncertainty on these assets and offer guidance for investors. Data was sourced from Yahoo Finance, and analysed using GARCH models (GARCH (1, 1), GJR-GARCH (1, 1), and E-GARCH (1, 1) to assess volatility and leverage effects. The findings show that GARCH (1, 1) best describes the behaviour of USD/PHP, USD/VND, Ethereum, and Ripple, while GJR-GARCH (1, 1) fits USD/MYR and USD/THB more accurately. E-GARCH (1, 1) proved ideal for USD/IDR, USD/SGD, and Bitcoin, capturing the asymmetric nature of volatility. Crypto currencies, particularly Bitcoin, experienced higher volatility and risk compared to exchange rates, with Bitcoin showing sharp price movements. On the other hand, assets like the Malaysian Ringgit (MYR) and Ripple were more stable, especially after the crisis, making them more appealing to risk-averse investors. In conclusion, the study highlights the value of advanced GARCH models in managing financial risks during geopolitical uncertainty. The results offer useful insights for investors looking to adjust their strategies and make better decisions in volatile market conditions.
Keywords: ASEAN, Crypto Currency, Exchange Rate, Red Sea War Event, Volatility.