The aim of this paper is to model the dynamic evolution of daily log-price ranges for two foreign exchange rates, SF/USD and USD/GBP. Following Chou (2001),we adopt the CARR model, which is identical to the ACD model of Engle & Russell (1998). Log-price ranges are highly efficient measures of...

This note draws an analogy between deviations from no-arbitrage forward-spot relationships in currency and in commodity markets. The key is to notice that the U.S. dollar acts as a commodity in foreign exchange (FX) markets. In the physical commodity space, if the spot price is too high relative...

I link deviations from forward-spot parity for currencies and commodities. The key is to think of the U.S. dollar as a “commodity.” When commodity spot prices are too high compared to futures, arbitrageurs will short the commodity and bank dollars. When physical scarcity constrains commodity...