Determinants Of Currency Risk Premiums
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Determinants Of Currency Risk Premiums
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Author : John A. Carlson
language : en
Publisher:
Release Date : 2006
Determinants Of Currency Risk Premiums written by John A. Carlson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
This paper presents a theoretical model of exchange-rate determination intended to address the forward premium puzzle. It also explains the empirical observation that risk premiums depend on interest differentials. The model's closed-form solution indicates that currency risk premiums depend on two factors: interest differentials and the current deviation of the exchange rate from its long-run equilibrium. If speculators have an alternative to exchange-rate speculation, then there is no presumption that uncovered interest parity holds even approximately in long-run equilibrium. The model is consistent with existing evidence suggesting that forward premiums are negatively related to rationally expected future exchange rate changes. New empirical evidence is provided in support of the model.
Determinants Of Currency Risk Premiums
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Author : John A. Carlson
language : en
Publisher:
Release Date : 1998
Determinants Of Currency Risk Premiums written by John A. Carlson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Foreign exchange futures categories.
Foreign Exchange Risk Premium Determinants
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Author : Tigran Poghosyan
language : cs
Publisher:
Release Date : 2006
Foreign Exchange Risk Premium Determinants written by Tigran Poghosyan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
Determinants Of The Foreign Exchange Risk Premium In Gulf Cooperation Council Countries
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Author : Mr.Tigran Poghosyan
language : en
Publisher: International Monetary Fund
Release Date : 2010-11-01
Determinants Of The Foreign Exchange Risk Premium In Gulf Cooperation Council Countries written by Mr.Tigran Poghosyan and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-11-01 with Business & Economics categories.
This paper analyzes macroeconomic determinants of the foreign exchange risk premium in two Gulf Cooperation Council (GCC) countries that peg their currencies to the U.S. dollar: Saudi Arabia and the United Arab Emirates. The analysis is based on the stochastic discount factor methodology, which imposes a no arbitrage condition on the relationship between the foreign exchange risk premium and its macroeconomic determinants. Estimation results suggest that U.S. inflation and consumption growth are important factors driving the risk premium, which is in line with the standard C-CAPM model. In addition, growth in international oil prices influences the risk premium, reflecting the important role played by the hydrocarbon sector in GCC economies. The methodology employed in this paper can be used for forecasting the risk premium on a monthly basis, which has important practical implications for policymakers interested in the timely monitoring of risks in the GCC.
Foreign Exchange Risk Premium
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Author : Mr.Lorenzo Giorgianni
language : en
Publisher: International Monetary Fund
Release Date : 1997-04-01
Foreign Exchange Risk Premium written by Mr.Lorenzo Giorgianni and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-04-01 with Business & Economics categories.
This paper challenges the conventional view that foreign exchange risk premiums are small, not volatile, and unrelated to macroeconomic variables. For the Italian lira (1987-94), unconditional risk premiums—constructed using survey data to measure exchange rate expectations—are found to be sizable (relative to the dimension of the forward premium), highly volatile (relative to the variability of the forward bias), and predictable. Estimation of structural models of the risk premium suggests that anticipated fiscal contractions in Italy and lower uncertainty about the future path of fiscal policy are associated with a lower risk premium on lira-denominated assets.
Pricing Currency Risk
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Author : Sergio L. Schmukler
language : en
Publisher:
Release Date : 2002
Pricing Currency Risk written by Sergio L. Schmukler and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with Capital costs categories.
Hard pegs, such as currency boards, intend to reduce or even eliminate currency risk. This paper investigates the patterns and determinants of the currency risk premium in two currency boards -- Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. Currency premia differ across markets. The forward discount typically exceeds the currency premium derived from interbank rates, particularly during crisis times. The large magnitude of these cross-market differences can be the consequence of unexploited arbitrage opportunities, market segmentation, or other risks embedded in typical measures of currency risk. The premium and its term structure depend on domestic and global factors, related to devaluation expectations and risk perceptions.
Currency Risk Premiums
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Author : Mikhail Chernov
language : en
Publisher:
Release Date : 2023-11-29
Currency Risk Premiums written by Mikhail Chernov and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-11-29 with Business & Economics categories.
Currency Risk Premiums: A Multi-Horizon Perspective reviews the literature on multi-horizon currency risk premiums. It shows how the multi-horizon implications arise from the classic present-value relationship. The authors further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is strengthened by explicitly accounting for stochastic discount factors. Information about currency risk premiums at different horizons presents a wealth of new evidence and challenges for existing models.
Country And Currency Risk Premia In An Emerging Market
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Author : Ian Domowitz
language : en
Publisher:
Release Date : 1999
Country And Currency Risk Premia In An Emerging Market written by Ian Domowitz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with categories.
The magnitude and determinants of credit and currency risks are topics of considerable importance. This paper uses data on peso- and dollar-denominated debt issued by the Mexican government to identify currency and country risk premia. We show that shoc ks in equity and debt market returns translate into long-term increases in the premium demanded by investors with respect to currency and country factors. Country and currency premia help explain equity returns and closed-end fund discounts. Additional evidence is provided showing that investors did not anticipate the magnitude or timing of the currency devaluation of December 1994 and the subsequent financial crisis.
Pricing Currency Risk
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Author : Sergio L. Schmukler
language : en
Publisher:
Release Date : 2013
Pricing Currency Risk written by Sergio L. Schmukler and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
The authors investigate the patterns and determinants of the currency risk premium in two currency boards-Argentina and Hong Kong. Despite the presumed rigidity of currency boards, currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. Currency premia differ across markets. The forward discount typically exceeds the currency premium derived from interbank rates, particularly during times of crisis. The large magnitude of these cross-market differences can be the consequence of unexploited arbitrage opportunities, market segmentation, or other risks embedded in typical measures of currency risk. The premium and its term structure depend on domestic and global factors related to devaluation expectations and risk perceptions.
Currency Risk Premia In Global Stock Markets
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Author : Shaun K. Roache
language : en
Publisher: International Monetary Fund
Release Date : 2006-08
Currency Risk Premia In Global Stock Markets written by Shaun K. Roache and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006-08 with Business & Economics categories.
Large fundamental imbalances persist in the global economy, with potential exchange rate implications. This paper assesses whether exchange rate risk is priced across G-7 stock markets. Given the multitude of hedging instruments available, theory suggests that stock market investors should not be compensated for currency risk. However, data covering 33 industry portfolios across seven major stock markets suggest that not only is exchange rate risk priced in many markets, but that it is time-varying and sensitive to currency-specific shocks. With stock market investors typically exhibiting "home bias," this suggests that investors are using equity asset proxies to hedge the exchange rate risks to consumption.