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We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines … values for the volatility of the exchange rate, the forward premium puzzle regression coefficients, and near-random walk …
Persistent link: https://www.econbiz.de/10012759530
We propose a new model of exchange rates, which yields a theory of the forward premium puzzle. Our explanation combines … values for the volatility of the exchange rate, the forward premium puzzle regression coefficients, and near-random walk …
Persistent link: https://www.econbiz.de/10012464842
In this paper, a simple no-arbitrage methodology to estimate option-implied interest rates and dividend yields simultaneously via a regression model is employed. Since the mean-based least squares estimation places equal weights on all data points making it sensitive to outliers, a robust...
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