Exchange market pressure (EMP) measures the pressure on a currencyto depreciate. It adds to the actual depreciation a weightedcombination of policy instruments used to ward off depreciation,such as interest rates and foreign exchange interventions, where theweights are their effectiveness. The...

If there is exchange market pressure (EMP), monetary authorities can use the interest rate and official interventions to offset this depreciation tendency, or they can let the exchange rate change. We introduce a new approach to derive how these three variables should be combined to measure EMP....

We show how distributions can be reduced to low-dimensional scenario trees. Applied to intertemporal distributions, the scenarios and their probabilities become time-varying factors. From S&P 500 options, two or three time-varying scenarios suffice to forecast returns, implied variance or...

There are several econometric studies in the literature discussing the empirics of the foreign exchange rate movements and the volatility of the foreign exchange and its association with some fundamentals under different exchange rate regimes in Turkey. However,all these concentrate on the...

This paper investigates the dependence structure between the equity market and the foreign exchange market by using copulas. In particular, several copulas with different dependence structure are compared and used to directly model the underlying dependence structure. We find that there exists...

A moment risk premium is the difference between a realized and the corresponding implied moment. I establish the existence of non-zero moment risk premiums in currency markets. Quadratic and quartic risk premiums are mostly negative whereas cubic premiums do not exhibit a predominant sign. The...

This paper examines the relationship between currency option's implied skewness and its future realized skewness, where the difference is known as the skewness risk premium (SRP). The SRP indicates whether investors pay a premium to be insured against future crash risk. Past investigations about...

The performance of dynamic trading and investment strategies can be difficult to predict. Although not without its problems, analysis of the historical performance of a strategy can provide valuable insight into its general risk and return properties. Furthermore, historical analysis allows one...