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The Term Structure of the Forward Premium
Hakkio, Craig S. - 2013
. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term … expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions … indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada …
Persistent link: https://www.econbiz.de/10012754712
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Fixes : Of the Forward Discount Puzzle
Flood, Robert P.; Rose, Andrew - 2021
Regressions of ex post changes in floating exchange rates on appropriate interest differentials typically imply that the high- interest rate currency tends to appreciate, the `forward discount puzzle.' Using data from the European Monetary System, we find that a large part of the forward...
Persistent link: https://www.econbiz.de/10013310558
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The Information in Long-Maturity Forward Rates : Implications for Exchange Rates and the Forward Premium Anomaly
Boudoukh, Jacob - 2005
consistent with economic theory. Forward interest rates also forecast future spot interest rates and future inflation. Thus, we …
Persistent link: https://www.econbiz.de/10012784029
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The Forward Premium is Still a Puzzle
Burnside, A. Craig - 2007
Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency quot;compensate US investors for taking on more US consumption growth risk,quot; yet the stochastic discount factor corresponding to their benchmark model is approximately...
Persistent link: https://www.econbiz.de/10012776875
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Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats
Hsieh, David A. - 2009
This paper tests the hypothesis that traders have rational expeatations and charge no risk premium in the forward exchange market. It uses a statistical procedure which is consistent under a large class of heteroscedasticity, and a set of data which takes into account the institutional features...
Persistent link: https://www.econbiz.de/10013159483
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The Covariation of Risk Premiums and Expected Future Spot Exchange Rates
Hodrick, Robert J. - 2010
Fama(1984) analyzed the variability and the covariation of risk premiums and expected rates of depreciation. We employ three statistical techniques that do not suffer from a potential bias in Fama's analysis, but we nevertheless confirm his findings. In contrast to his interpretation the results...
Persistent link: https://www.econbiz.de/10012762951
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An Investigation of Risk and Return in Forward Foreign Exchange
Hodrick, Robert J. - 2008
This paper examines the determination of risk premiums in foreign exchange markets. The statistical model is based on a theoretical model of asset pricing, which leads to severe cross-equation constraints. Statistical tests lead to a rejection of these constraints. We examine the robustness of...
Persistent link: https://www.econbiz.de/10012774705
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Forward and Spot Exchange Rates in a Multi-Currency World
Hassan, Tarek A. - 2014
Separate literatures study violations of uncovered interest parity (UIP) using regression-based and portfolio-based methods. We propose a decomposition of these violations into a cross-currency, a between-time-and-currency, and a cross-time component that allows us to analytically relate...
Persistent link: https://www.econbiz.de/10013050308
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The Forward Premium Puzzle in a Two-Country World
Martin, Ian - 2011
I explore the behavior of asset prices and the exchange rate in a two-country world. When the large country has bad news, the relative price of the small country's output declines. As a result, the small country's bonds are risky, and uncovered interest parity fails, with positive excess returns...
Persistent link: https://www.econbiz.de/10013118842
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Risk and Exchange Rates
Obstfeld, Maurice; Rogoff, Kenneth S. - 2021
This paper develops an explicitly stochastic new open economy macroeconomics' model, which can potentially be used to explore the qualitative and quantitative welfare differences between alternative exchange rate regimes. A crucial feature is that we do not simplify by assuming certainty...
Persistent link: https://www.econbiz.de/10013232899