We provide robust evidence of deviations from the Covered Interest Parity (CIP) relation since the onset of the crisis in August 2007. The CIP deviations exist with respect to different dollar interest rates and exchange rate pairs of the dollar vis-à-vis other currencies. The results show that...

We conjecture that the forward puzzle may reflect career risks: when professional investors observe public danger signals about a currency, they require a premium for holding it. We find evidence of this in ERM rates. As deep discounts do signal danger, we next specify nonlinear variants of the...

Recent findings that suggest a robust negative association between changes in the cross-currency basis and the broad dollar have taken center stage in the international finance literature. In this article, we revisit this issue, from a purely empirical, data-driven perspective, using G10 and 10...

This paper presents techniques for modelling and estimating the behavior of financial market price or return differentials that follow non-linear regime-switching behaviour. The methodology to be used here is estimation of variants of threshold autoregression (TAR) models. In the basic model the...

We find that deviations from the covered interest rate parity condition (CIP) imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk...

This paper tested the factors which cause deviation from covered interest rate parity (CIRP) in Korea, using regression and VAR models. The empirical evidence indicates that the difference between the swap rate and interest rate differential exists and is greatly affected by variables which...

This paper examines how U.S. monetary policy uncertainty (MPU) affects RMB deviations from covered interest parity (CIP) and how this effect is influenced by China's capital controls, the RMB exchange rate regime, and international reserves that constrain the transmitting channel of U.S. MPU...

We find that deviations from the covered interest rate parity condition (CIP) imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk...