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Determinants of Currency Risk Premiums

Determinants of Currency Risk Premiums PDF Author: John A. Carlson
Publisher:
ISBN:
Category : Foreign exchange futures
Languages : en
Pages : 42

Book Description


Determinants of Currency Risk Premiums

Determinants of Currency Risk Premiums PDF Author: John A. Carlson
Publisher:
ISBN:
Category : Foreign exchange futures
Languages : en
Pages : 42

Book Description


Determinants of Currency Risk Premiums

Determinants of Currency Risk Premiums PDF Author: John A. Carlson
Publisher:
ISBN:
Category :
Languages : en
Pages : 42

Book Description
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.

Foreign Exchange Risk Premium Determinants

Foreign Exchange Risk Premium Determinants PDF Author: Tigran Poghosyan
Publisher:
ISBN: 9788073440831
Category :
Languages : cs
Pages : 37

Book Description


Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries

Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries PDF Author: Mr.Tigran Poghosyan
Publisher: International Monetary Fund
ISBN: 1455209554
Category : Business & Economics
Languages : en
Pages : 26

Book Description
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

Foreign Exchange Risk Premium PDF Author: Mr.Lorenzo Giorgianni
Publisher: International Monetary Fund
ISBN: 1451845790
Category : Business & Economics
Languages : en
Pages : 40

Book Description
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

Pricing Currency Risk PDF Author: Sergio L. Schmukler
Publisher:
ISBN:
Category : Capital costs
Languages : en
Pages : 88

Book Description
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.

The Foreign Exchange Risk Premium

The Foreign Exchange Risk Premium PDF Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :

Book Description


Currency Risk Premiums

Currency Risk Premiums PDF Author: Mikhail Chernov
Publisher:
ISBN: 9781638283102
Category : Business & Economics
Languages : en
Pages : 0

Book Description
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.

Currency Risk Premia Redux

Currency Risk Premia Redux PDF Author: Federico Nucera
Publisher:
ISBN:
Category : Assets (Accounting)
Languages : en
Pages : 0

Book Description
We study a large currency cross section using asset pricing methods which account for omitted-variable and measurement-error biases. First, we show that the pricing kernel includes at least three latent factors which resemble (but are not identical to) a strong U.S. “Dollar” factor, and two weak, high Sharpe ratio “Carry” and “Momentum” slope factors. Evidence for an additional “Value” factor is weaker. Second, using this pricing kernel, we find that only a small fraction of the over 100 nontradable candidate factors considered have a statistically significant risk premium -- mostly relating to volatility, uncertainty and liquidity conditions, rather than macro variables.

The Equity Risk Premium

The Equity Risk Premium PDF Author: William N. Goetzmann
Publisher: Oxford University Press
ISBN: 0199881979
Category : Business & Economics
Languages : en
Pages : 568

Book Description
What is the return to investing in the stock market? Can we predict future stock market returns? How have equities performed over the last two centuries? The authors in this volume are among the leading researchers in the study of these questions. This book draws upon their research on the stock market over the past two dozen years. It contains their major research articles on the equity risk premium and new contributions on measuring, forecasting, and timing stock market returns, together with new interpretive essays that explore critical issues and new research on the topic of stock market investing. This book is aimed at all readers interested in understanding the empirical basis for the equity risk premium. Through the analysis and interpretation of two scholars whose research contributions have been key factors in the modern debate over stock market perfomance, this volume engages the reader in many of the key issues of importance to investors. How large is the premium? Is history a reliable guide to predict future equity returns? Does the equity and cash flows of the market? Are global equity markets different from those in the United States? Do emerging markets offer higher or lower equity risk premia? The authors use the historical performance of the world's stock markets to address these issues.