Hai, Weike; Mark, Nelson C; Wu, Yangru - In: Journal of Applied Econometrics 12 (1997) 6, pp. 715-34
Using the Kalman filter, we obtain maximum likelihood estimates of a permanent-transitory components model for log spot and forward dollar prices of the pound, the franc, and the yen. This simple parametric model is useful in understanding why the forward rate may be an unbiased predictor of the...