This paper provides the first systematic study of the temporal and cross-sectional variation in the forward premium in very short-term rates. Using a unique and comprehensive data set of European repurchase agreements (repo), we find that the forward premium varies significantly with the (net)...

The paper presents a method of computing the risk neutral probability distribution of future exchange rates from the prices of currency options. The method is applied to estimate the risk neutral ex ante probability of a realignment of the pound sterling against the mark in 1992. The computation...