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Forecasting exchange rates of major currencies with long maturity forward rates

Darvas, Zsolt M.; Schepp, Zoltán - 2020

between the fundamental equilibrium exchange rate and the actual exchange rate with the long-maturity forward exchange rate … the long-maturity forward exchange rate is assumed to be stationary, as opposed to assuming non-stationarity. The …

Persistent link: https://www.econbiz.de/10012302033

Long maturity forward rates of major currencies are stationary

Darvas, Zsolt M.; Schepp, Zoltán - In: Applied economics letters 16 (2009) 10/12, pp. 1175-1181

Persistent link: https://www.econbiz.de/10003886689

GPU Pricing of Exotic Cross-Currency Interest Rate Derivatives with a Foreign Exchange Volatility Skew Model

Dang, Duy-Minh - 2011

Bermudan cancelable features. We consider a three-factor pricing model with FX volatility skew which results in a time …

Persistent link: https://www.econbiz.de/10013133913

Foreign Exchange Return Predictability : Rational Expectations Risk Premium vs. Expectational Errors

Moon, Seongman - 2019

We propose a simple identification scheme for the causes of the violations of uncovered interest parity. Our method uses the serial dependence patterns of excess returns as a criterion for judging performance of economic models. We show that a mean reverting component in excess returns,...

Persistent link: https://www.econbiz.de/10012895804

Great expectations? : evidence from Colombia’s exchange rate survey

Echavarría Soto, Juan José; Villamizar, Mauricio - In: Latin American economic review : LAER ; official … 25 (2016), pp. 1-27

In this paper, we use the largest exchange rate survey in Colombia to test for the rational expectations hypothesis, the presence of a time-varying risk premium and the accuracy of exchange rate forecasts. Our findings indicate that episodes of exchange rate appreciation preceded expectations of...

Persistent link: https://www.econbiz.de/10011885644

Did option prices predict the ERM crises?

Mizrach, Bruce Marshall - 1996

Option prices seem to behave in ways inconsistent with the Black-Scholes model. Implied volatility varies with the … strike price in a parabolic shape that is often called the volatility 'smile.' My objective in this paper is to identify … promising in explaining the volatility smile. Applying this to the ERM data, I find that the probability of a devaluation in the …

Persistent link: https://www.econbiz.de/10011577049

Covered interest parity : a stochastic volatility approach to estimate the neutral band

Hernández, Juan Ramón - 2020

proposes an estimate of the neutral band based on the one-step-ahead density forecast obtained from a stochastic volatility … stochastic volatility models have the best fit and forecasting performance, hence superior neutral band estimates. …

Persistent link: https://www.econbiz.de/10012195198

Behavioral Biases in Forward Rates as Forecasts of Future Exchange Rates : Evidence of Systematic Pessimism and Under-Reaction

Aggarwal, Raj - 2016

Even though the forward-spot relationship in currency markets is very important for policy makers and for corporate and investment managers, it remains a theoretical and empirical puzzle. In theory the forward rate should be an unbiased forecast of the future spot rate, but this hypothesis has...

Persistent link: https://www.econbiz.de/10013004445

Rationality and Forecasting Accuracy of Exchange Rate Expectations : Evidence from Survey-Based Forecasts

Ince, Onur - 2019

We examine rationality, forecasting accuracy, and economic value of the survey-based exchange rate forecasts for 10 developed and 23 developing countries at the 3-, 12-, and 24-month horizons. Using the data from two surveys for the period from 2004 to 2012, we find strong evidence that the...

Persistent link: https://www.econbiz.de/10012903718

Yield Curve Predictors of Foreign Exchange Returns

Ang, Andrew - 2011

In a no-arbitrage framework, any variable that affects the pricing of the domestic yield curve has the potential to predict foreign exchange risk premiums. The most widely used interest rate predictor is the difference in short rates across countries, known as carry, but the short rate is only...

Persistent link: https://www.econbiz.de/10013133966

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