forecast. In a stylized data generating process, we show that such forecasts can be effective even if there is essentially no … rates against 17 OECD countries. We forecast using factors, and using factors combined with any of fundamentals suggested by … improve on the forecast of a "no change" benchmark in the late (1999-2007) but not early (1987-1998) parts of our sample …

and forecasting. Building on the theory of continuous-time arbitrage-free price processes and the theory of quadratic … volatility forecast, coupled with a parametric lognormal-normal mixture distribution implied by the theoretically and empirically …

evidence that the forecast of the Markov model are superior at predicting the direction of change of the exchange rate …

estimation techniques. We propose an alternative set of criteria for evaluating forecast rationality which entails the following … requirements: the forecast and the actual series i) have the same order of integration, ii) are cointegrated, and iii) have a …

the data, and the point estimates are in line with the implications of our theory. Furthermore, the uncovered interest …

We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines … uncover latent disaster risk, and help forecast exchange rate movements. We then extend the framework to incorporate two …