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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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Predictable Changes in Yields and Forward Rates
Backus, David K. - 2010
simple form with forward rates: as theory suggests, the largest discrepancies are at short maturities. (ii) Reasonable …
Persistent link: https://www.econbiz.de/10012763624
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FX Counterparty Risk and Trading Activity in Currency Forward and Futures Markets
Levich, Richard M. - 2012
The Global Financial Crisis initiated a period of market turbulence and increased counterparty risk for financial institutions. Even though the Dodd-Frank Act is likely to exempt interbank foreign exchange trading from a central counterparty mandate, market participants have the option to trade...
Persistent link: https://www.econbiz.de/10013103054
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Information Aggregation, Security Design and Currency Swaps
Chowdhry, Bhagwan - 2004
securities are derivative contracts that are contingent on state variables that influence adverse selection costs. This is … because the netting of cash flows in these derivative contracts, in effect, alters the state-by-state seniority of different …
Persistent link: https://www.econbiz.de/10012786186
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Rational Inattention : A Solution to the Forward Discount Puzzle
Bacchetta, Philippe - 2005
The uncovered interest rate parity equation is the cornerstone of most models in international macro. However, this equation does not hold empirically since the forward discount, or interest rate differential, is negatively related to the subsequent change in the exchange rate. This forward...
Persistent link: https://www.econbiz.de/10012784266
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The Term Structure of Forward Exchange Premia and the Forecastibility of Spot Exchange Rates : Correcting the Errors
Clarida, Richard - 2010
We present theory and evidence that challenges the view that forward premia contain little information regarding …
Persistent link: https://www.econbiz.de/10012763403
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The Out-of-Sample Success of Term Structure Models as Exchange Rate Predictors : A Step Beyond
Clarida, Richard; Sarno, Lucio; Taylor, Mark P.; … - 2021
A large literature suggests that standard exchange rate models cannot outperform a random walk forecast and that the forward rate is not an optimal predictor of the spot rate. However, there is evidence that the term structure of forward premia contains valuable information for forecasting...
Persistent link: https://www.econbiz.de/10013220936
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Covered Interest Arbitrage : Then vs. Now
Juhl, Ted; Miles, William; Weidenmier, Marc - 2021
We introduce a new weekly database of spot and forward US-UK exchange rates as well as interest rates to examine the integration of forward exchange markets during the classical gold standard period (1880-1914). Using threshold autoregressions (TAR), we estimate the transactions cost band of...
Persistent link: https://www.econbiz.de/10013223800
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Political vs. Currency Premia in International Real Interest Differentials : a Study of Forward Rates for 24 Countries
Frankel, Jeffrey A.; MacArthur, Alan T. - 2021
Different approaches to quantifying the degree of capital mobility for a cross-section of currencies -- particularly saving-investment correlations and tests of real interest parity - have appeared to show a surprisingly low degree of financial market integration. We use a new data set, forward...
Persistent link: https://www.econbiz.de/10013231589
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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