Understanding the Forward Premium Puzzle : A Microstructure Approach

High-interest-rate currencies tend to appreciate relative to low-interest-rate currencies. We argue that adverse-selection problems between participants in foreign exchange markets can account for this 'forward premium puzzle.' The key feature of our model is that the adverse selection problem facing market makers is worse when, based on public information, a currency is expected to appreciate

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Year of publication:	[2007]
Authors:	Eichenbaum, Martin
Other Persons:	Burnside, A. Craig (contributor) ; Rebelo, Sergio T. (contributor)
Publisher:	[2007]: [S.l.] : SSRN
Subject:	Devisenmarkt \| Foreign exchange market \| Derivat \| Derivative \| Zinsstruktur \| Yield curve \| Wechselkurspolitik \| Exchange rate policy \| Adverse Selektion \| Adverse selection

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Extent:	1 Online-Ressource (31 p)
Series:	NBER Working Paper ; No. w13278
Type of publication:	Book / Working Paper
Language:	English
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 2007 erstellt
Source:	ECONIS - Online Catalogue of the ZBW

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