The United States (US) extracts a large macroeconomic premium from foreigners: she enjoys higher consumption and GDP growths on average relative to the rest of the world (ROW). This is earned even though the US is relatively insulated against global consumption and GDP risks, challenging a...

A contingent claims valuation model which allows to highlight the implications of program trading in spot markets for the pricing of European-style foreign currency options and for the volatility strike structure implicit in these contracts is devoloped. The curvature of the volatility strike...

This paper investigates the relationship between the euro-dollar exchange rate and its underlying fundamentals. First, we develop a simple theoretical model in which chartists and fundamentalists interact. This model predicts the existence of different regimes, and thus nonlinearities in the...