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Breaking par : short-term determinants of yen-dollar swap deviations

Angrick, Stefan; Nemoto, Naoko - 2018

This paper analyses deviations in yen-dollar cross-currency swap markets between 2007 and 2017. Using weekly-frequency data on money market-related and capital marketrelated financial variables, we analyse how the cross-currency basis is influenced by differences in returns and different types...

Persistent link: https://www.econbiz.de/10011893926

Covered Interest Parity Arbitrage

Rime, Dagfinn - 2020

---both across banks and currency areas. For most market participants, the no-arbitrage relation holds fairly well when implemented … using marginal funding costs and risk-free investment instruments. However, a few high-rated banks do enjoy CIP arbitrage … demand for dollar funding, by inducing opposite (arbitrage) flows from high-rated banks. Arbitrage trades are difficult to …

Persistent link: https://www.econbiz.de/10012854893

Uncovered return parity : equity returns and currency returns

Djeutem, Edouard; Dunbar, Geoffrey R. - 2018

We propose an uncovered expected returns parity (URP) condition for the bilateral spot exchange rate. URP implies that unilateral exchange rate equations are misspecified and that equity returns also affect exchange rates. Fama regressions provide evidence that URP is statistically preferred to...

Persistent link: https://www.econbiz.de/10011844179

An intermediation-based model of exchange rates

Malamud, Semyon; Schrimpf, Andreas - 2018 - This version: June 5, 2018

We develop a general equilibrium model with intermediaries at the heart of international financial markets. Global intermediaries bargain with households and extract rents for providing access to foreign claims. The behavior of intermediaries, by tilting state prices, breaks monetary neutrality...

Persistent link: https://www.econbiz.de/10011877302

The impacts of global risk and US monetary policy on US Dollar exchange rates and excess currency returns

Bernoth, Kerstin; Herwartz, Helmut; Trienens, Lasse - 2023

We examine the causal relationship between US monetary policy shocks, exchange rates and currency excess returns for a sample of eight advanced countries over the period 1980M1 to 2022M11. We find that the dynamics of the US dollar exchange rate is the main driver of currency excess returns. The...

Persistent link: https://www.econbiz.de/10014305726

Peso-Dollar forward market analysis : explaining arbitrage opportunities during the financial crisis

Hernández, Juan R. - 2014

Using a vector error correction model I test whether shocks in the funding liquidity conditions in the U.S. and Europe separately explain deviations from the covered interest parity (CIP) between the U.S. Dollar and the Mexican Peso. I find that: (1) Apparent deviations from the CIP seem to be...

Persistent link: https://www.econbiz.de/10010370903

The forward premium puzzle only emerges gradually

Bernoth, Kerstin; Hagen, Jürgen von; Vries, Casper G. de - 2007

The forward premium puzzle (FPP) is the negative correlation between the forward premium and the realized exchange rate return at maturities of a month and beyond. Some recent evidence shows that at maturities of multiple years and at the highest intra day frequency the correlation is positive...

Persistent link: https://www.econbiz.de/10011372514

Price-setting in the foreign exchange swap market : evidence from order flow

Syrstad, Olav; Viswanath-Natraj, Ganesh - 2020

This paper investigates price discovery in foreign exchange (FX) swaps. Using data on inter-dealer transactions, we find that a 1 standard deviation increase in order flow (i.e. net pressure to obtain USD through FX swaps) increases the cost of dollar funding by up to 4 basis points after the...

Persistent link: https://www.econbiz.de/10012417506

Forward and Spot Exchange Rates in a Multi-Currency World

Hassan, Tarek A. - 2017

Separate literatures study violations of uncovered interest parity 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/10012974287

Detecting scapegoat effects in the relationship between exchange rates and macroeconomic fundamentals

Pozzi, Lorenzo; Sadaba, Barbara - 2017

between the theory on scapegoats and its empirical implementation. This new testing method consists of a number of steps …

Persistent link: https://www.econbiz.de/10011662005

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