Fx Risk Premia From The Bond Markets
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Fx Risk Premia From The Bond Markets
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Author : Mi Wu
language : en
Publisher:
Release Date : 2018
Fx Risk Premia From The Bond Markets written by Mi Wu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with Bond market categories.
"This paper proposes a two-country term structure model of joint behavior of bond markets and foreign exchange (FX) markets. With risk factors extracted from local bond markets of G10 currency countries, the term structure model is able to reproduce the uncovered interest parity (UIP) puzzle as observed in the FX market. Bond market risk factors explain up to 50% of the variations in exchange rate movements at a one-year horizon and over 90% for investment currency countries at a five-year horizon. For the three-month currency excess returns, the model-implied time-varying risk premia deliver 46.3%, on average, more explanatory power than the interest rate differentials. The model quantifies the level of integration between the FX market and bond markets. The empirical findings also reveal heterogeneity between investment- and funding-currency countries in terms of the risk exposure to the bond market transitory shocks"--Page vii.
The World Price Of Foreign Exchange Risk
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Author : Bernard Dumas
language : en
Publisher:
Release Date : 1993
The World Price Of Foreign Exchange Risk written by Bernard Dumas and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Capital assets pricing model categories.
We consider a world capital market in which the investor population is heterogenous. Investors of different countries differ in the prices of goods at which they consume the income from their investments. In such a setting, the international CAPM incorporates rewards for exchange rate risk, in addition to the traditional reward for market-covariance risk. The aim of the paper is to determine whether these additional risk premia empirically playa significant role in the pricing of securities. The test being conducted is a test of a conditional version of the CAPM. It builds on the recent empirical literature which points out that stock market returns may, to some extent, be predicted on the basis of a number of instrumental variables, such as interest rates and dividend yields. All previous tests of the international CAPM with exchange risk premia have been tests of the unconditional version and have been inconclusive.
Random Walks In Fixed Income And Foreign Exchange
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Author : Jessica James
language : en
Publisher: Walter de Gruyter GmbH & Co KG
Release Date : 2021-06-08
Random Walks In Fixed Income And Foreign Exchange written by Jessica James and has been published by Walter de Gruyter GmbH & Co KG this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-06-08 with Business & Economics categories.
The fixed income and foreign exchange (FX) markets have never been as challenging to operate in as they are today. The post-crash combination of reduced liquidity, higher operating costs, low interest rates, flat yield curves and increased regulation means that market makers and investors alike need to work harder to generate value and remain in full understanding of the markets. Random Walks in Fixed Income and Foreign Exchange brings together the best of detailed and original practitioner-orientated market research on many specialist areas of the bond and FX markets. Written by the highly regarded FX and bonds research desk at Commerzbank, the book offers varied and in-depth insight into specific topics of vital important to dealers and investors, including the cross-currency basis and hedging, the yield curve, and overseas issuance conversion factors which will give investors a genuine edge in generating value. Written in accessible text, it is a must-read for all those interested in bonds and FX.
Handbook Of Emerging Fixed Income And Currency Markets
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Author : Frank J. Fabozzi
language : en
Publisher: John Wiley & Sons
Release Date : 1997-08-15
Handbook Of Emerging Fixed Income And Currency Markets written by Frank J. Fabozzi and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-08-15 with Business & Economics categories.
The fixed income markets in emerging countries represent a new and potentially lucrative area of investment for investors. But along with the possibility of big returns, there is a much greater risk. The Handbook of Emerging Fixed Income and Currency Markets shows investors how to identify solid investment opportunities in these markets, assess the risk potential, and develop an investment approach to ensure long-range profits. Featuring contributions from leading experts around the world, this book provides a comprehensive and authoritative guide to these exciting new markets.
International Capital Markets And Foreign Exchange Risk
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Author : Michael J. Brennan
language : en
Publisher:
Release Date : 2008
International Capital Markets And Foreign Exchange Risk written by Michael J. Brennan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
The relation between the volatilities of pricing kernels associated with different currencies and the volatility of the exchange rate between the currencies is derived under the assumption of integrated capital markets, and the volatilities of the pricing kernels are related to the foreign exchange risk premium. Time series of pricing kernel volatilities are estimated from panel data on bond yields for five major currencies using a parsimonious term structure model that allows for time varying pricing kernel volatilities. The resulting estimates are used to test hypotheses about the relation between the volatilities of the pricing kernels in different currencies and the volatility of the exchange rate. As predicted, time variation in foreign exchange risk premia is found to be related to time variation in both the volatility of the pricing kernels and the volatility of exchange rates: the estimated pricing kernel volatilities can account for the forward premium puzzle in an 'average' sense across exchange rates.
Essays On Return Predictability In Financial Markets
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Author : Chan R. Mang
language : en
Publisher:
Release Date : 2012
Essays On Return Predictability In Financial Markets written by Chan R. Mang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.
My thesis examines return predictability in government bond markets and currency markets. In Chapter 1, I take the term structure model in Cochrane and Piazzesi (2008) and construct currency market prices. The implied currency market prices are then counterfactually volatile and predictable, at least with respect to commonly used predictor variables. Getting the model closer to currency market data means reducing bond risk compensation but doing so nearly eliminates predictability in bond markets. One way to generate sensible time-variation in bond and currency risk-premia allows the volatility of returns to be time-varying. In Chapter 2, I test if alternative forecast rules perform better than the return-forecasting factor of Cochrane and Piazzesi (2008). I compare forecasts assuming all historical data is available to recursively made ones that are revised with the arrival of news. Differences in the two forecast rules systematically move with realized bond risk-premia and forecast mean yield curve levels and short-term interest rates one year ahead not just for the U.S., but also for government bond markets of other industrialized economies. I show that lower long-term rates relative to short-rates in 2004-2005 is consistent with an expected a decline of interest rates by market participants. In Chapter 3, I show that the cross-sectional average spread in the return-forecasting factor of Cochrane and Piazzesi (2005, 2008) can forecast currency risk-premia. However, the return-forecasting factor spread consistent with real-time data does not forecast currency risk-premia. I also find that both currency risk-premia and exchange rate changes have a predictable component that is detected by the information gap, what I call the hidden FX market factor, between forecasts that take as given the full sample of data and those consistent with real-time availability. Controlling for large and transitory exchange rate changes using this information gap make interest rate differentials between the average foreign country and the U.S. positively correlated with dollar appreciation rates, delivering the right sign predicted by uncovered interest parity.
The Link Between Foreign Exchange Premia And Term Structure Premia
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Author : Donald Lee Conner
language : en
Publisher:
Release Date : 1999
The Link Between Foreign Exchange Premia And Term Structure Premia written by Donald Lee Conner 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 first essay tests a theory of the failure of UIP based on cross-country differences in term structure premia. It finds that a measure of cross-country differences in term premia is more important in explaining deviations from UIP than a measure of exchange rate risk. This implies that foreign exchange market efficiency is inherently linked to the efficiency of domestic and foreign bond markets. To the extent that term structure premia are rational and efficient, deviations from UIP should also be rational and efficient.
The Foreign Exchange Risk Premium In A Target Zone With Devaluation Risk
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Author : Lars E. O. Svensson
language : en
Publisher:
Release Date : 1991
The Foreign Exchange Risk Premium In A Target Zone With Devaluation Risk written by Lars E. O. Svensson and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1991 with Foreign exchange categories.
The Currency Hedging Debate
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Author : Lee R. Thomas
language : en
Publisher: Ifr Publishing
Release Date : 1990
The Currency Hedging Debate written by Lee R. Thomas and has been published by Ifr Publishing this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990 with Business & Economics categories.
This title provides a forum for the discussion surrounding the use of currency hedging for portfolio managment and examines the arguments for the different hedging techniques. The main arguments are outlined with contributions from both academics and practitioners. The evidence on the performance of various funds is examined in detail.
Countercyclical Currency Risk Premia
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Author : Hanno Lustig
language : en
Publisher:
Release Date : 2010
Countercyclical Currency Risk Premia written by Hanno Lustig and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with Economics categories.
Currency excess returns are predictable, more than stock returns, and about as much as bond returns. The average forward discount of the dollar against developed market currencies is the best predictor of average foreign currency excess returns earned by U.S. investors on a long position in a large basket of foreign currencies and a short position in the dollar. The predicted excess returns on baskets of foreign currency are strongly counter-cyclical because they inherit the cyclical properties of the average forward discount. This counter-cyclical dollar risk premium compensates U.S. investors for taking on U.S.-specific risk in foreign exchange markets by shorting the dollar. Macroeconomic variables such as the rate of U.S. industrial production growth increase the predictability of average foreign currency excess returns even when controlling for the forward discount.