Modern financial markets offer the real world's best approximation to the idealized price auction market envisioned in economic theory. Nevertheless, as the increasingly exquisite and detailed financial data demonstrate, financial markets often fail to behave as they should if trading were truly...

This thesis contributes to three major fields in the international finance literature: forward premium anomaly, monetary policy and exchange rate determination, and measuring monetary policy expectations from asset prices. In the first chapter, I develop a production-based asset pricing model...