Standard economic models hold that exchange rates are influenced by fundamental variables such as relative money supplies, outputs, inflation rates and interest rates. Nonetheless, it has been well documented that such variables little help predict changes in floating exchange rates -- that is,...

The paper proposes a multi-factor international asset pricing model in which the exchange rate is allowed to be co-determined by a risk factor imperfectly correlated to other priced risks in the economy. The significance of this factor can be established as long as one is able to observe a proxy...

In this paper, we conduct an analysis of the implications of capital controls for financial stability. We study a financial transaction (Tobin) tax applicable to cross-border capital flows in a multi-good, multi-country dynamic equilibrium model with incomplete financial markets and...

We build currency portfolios based on the paradigm that exchange rates slowly converge to their equilibrium to highlight three results. First, this property can be exploited to build profitable portfolios. Second, the slow pace of convergence at short-horizons is consistent with the evidence of...

In this paper, we conduct an analysis of the implications of capital controls for financial stability. We study a financial transaction (Tobin) tax applicable to cross-border capital flows in a multi-good, multi-country dynamic equilibrium model with incomplete financial markets and...

We build currency portfolios based on the paradigm that exchange rates slowly converge to their equilibrium to highlight three results. First, this property can be exploited to build profitable portfolios. Second, the slow pace of convergence at short-horizons is consistent with the evidence of...

This paper addresses the question of whether sterilized central bank intervention systematically affects exchange rates. Furthermore, the paper analyzes whether a central bank can conduct its intervention operations in a specific manner, in order to increase the likelihood of achieving its...

This paper assesses the contemporaneous, leading and lagging indicator properties of financial market variables relative to movements in six major developed country currency pairs. As indicator variables changes in various relative asset prices, short-term portfolio flows and currency options...

This paper uses data on currency options prices for the exchange rates of the three largest new EU member states Poland, Czech Republic and Hungary vis-à-vis the euro and the US dollar to estimate the risk-neutral density (RND) functions and the density interval bands. Analysing the RNDs, we...

We compare option-implied correlation forecasts from a dataset consisting of over 10 years of daily data on over-the-counter (OTC) currency option prices to a set of return-based correlation measures and assess the relative quality of the correlation forecasts. We find that while the predictive...