The forward premium anomaly is one of the most robust puzzles in financial economics. We recast the underlying parity relation in terms of cross-country differences between forward interest rates rather than spot interest rates with dramatic results. These forward interest rate differentials...

Using transaction-level data on foreign exchange (FX) forward contracts, we document large demand-driven heterogeneity in banks' dollar hedging costs. For identification, we exploit regulatory end-of-quarter reporting that penalizes banks' currency exposure with capital surcharges. Contracts...

In this article, we apply interest rate parity, IRP, between two currencies EURO/USD to determine the implied currency appreciation or depreciation of an interest rate forward futures contract. Exchange rate risk is related to the appreciation or the depreciation of a currency relevant to...