Download or read book Market Efficiency and Forward Premia Term Structure in the Euro Foreign Exchange Market written by Marco Giammatteo and published by . This book was released on 2004 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the Euro foreign exchange market to test whether it could be considered efficient. In a second step, going beyond the implications of the expectations theory, we focus our attention on the cross-currency and cross-maturity term structures of the forward premia to asses whether, jointly, they have incremental information content in predicting future spot exchange rate changes compared to the term structure of the forward premia of that specific spot rate. Using daily exchange rates of the US Dollar, Canadian Dollar, British Pound and Japanese Yen against the Euro, we are forced to reject the Forward Rate Unbiasedness Hypothesis both in bivariate and multivariate systems. Moreover, we verify that the information embedded in the above mentioned term structures produces an increase in the goodness of fit of the future spot rate changes. Finally, similarly to the term structure of the interest rate case, in which is pointed out the presence of a short run rate factor, we show that the term structure of the forward exchange rate has a different long run behaviour according to the maturity of the various rates.
Download or read book The Term Structure of the Forward Premium written by Craig S. Hakkio and published by . This book was released on 2013 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most studies of the efficiency of the foreign exchange market focus on a single maturity -- usually a one month exchange rate. However, one observes that forward contracts of many maturities are simultaneously traded in the foreign exchange market. The hypothesis that the foreign. exchange market uses all available information has implications for the joint behavior of forward exchange rates of various maturities. This paper theoretically and empirically examines these implications. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term structure of (domestic and foreign)interest rates with the hypothesis of interest rate parity, a simple expression relating the six month forward premium to a geometric average of expected future one month forward premiums can be developed. By assuming that the one and six month forward premiums can be expressed as a bivariate stochastic process, one can derive an expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions on the parameters of the model. Two methods of testing the validity of the restrictions are presented. The results indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada.
Download or read book The Term Structure of the Forward Premium written by Craig S. Hakkio and published by . This book was released on 1980 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most studies of the efficiency of the foreign exchange market focus on a single maturity -- usually a one month exchange rate. However, one observes that forward contracts of many maturities are simultaneously traded in the foreign exchange market. The hypothesis that the foreign. exchange market uses all available information has implications for the joint behavior of forward exchange rates of various maturities. This paper theoretically and empirically examines these implications. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term structure of (domestic and foreign)interest rates with the hypothesis of interest rate parity, a simple expression relating the six month forward premium to a geometric average of expected future one month forward premiums can be developed. By assuming that the one and six month forward premiums can be expressed as a bivariate stochastic process, one can derive an expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions on the parameters of the model. Two methods of testing the validity of the restrictions are presented. The results indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada
Download or read book Efficiency and Risk Premia in Foreign Exchange Markets written by Juan Ayuso and published by . This book was released on 1993 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Market Volatility and Foreign Exchange Intervention in EMEs written by Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Foreign Exchange Market written by Richard T. Baillie and published by Cambridge University Press. This book was released on 1989 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: The flotation of exchange rates in the early 1970s saw a significant increase in the importance of foreign exchange markets and in the interest shown in them. Apart from the consequent institutional changes, this period also witnessed a revolution in macroeconomic analysis and finance theory based on the concept of rational expectations. This book provides an integrated approach to recent developments in the understanding of foreign exchange markets. It begins by charting the institutional background and looks at the recent history of movements in some of the major exchange rates. The theoretical sections focus on the economic and finance theory of the asset market approach, the macroeconomic models developed from this approach, and on interest rate parity theory. The empirical chapters draw on the authors' own research from a high quality set of exchange rate and interest rate data. The statistical properties of exchange rates are analysed; the relationship between spot and forward rates is examined; and the modelling and impact of new information on the forward and spot relationship is considered. The final chapter is devoted to the estimation and testing of exchange rate models.
Download or read book The term structure of forward foreign exchange premia written by Ronald MacDonald and published by . This book was released on 1987 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Efficiency of Interest Rate and Foreign Exchange Markets in the Euro Area and Central and Eastern Europe written by and published by . This book was released on 2012 with total page 183 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Time varying Risk Premia and the Term Structure of Forward Exchange Rates written by D. A. Peel and published by . This book was released on 1992 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Foreign Exchange Intervention Rules for Central Banks A Risk based Framework written by Romain Lafarguette and published by International Monetary Fund. This book was released on 2021-02-12 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Download or read book The Term Structure of Forward Exchange Premia and the Forecastability of Spot Exchange Rates written by R. H. Clarida and published by . This book was released on 1996 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Covered Interest Parity Deviations Macrofinancial Determinants written by Mr.Eugenio M Cerutti and published by International Monetary Fund. This book was released on 2019-01-16 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: For about three decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely—even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial drivers of the variation in CIP deviations have also become significant. The variation in CIP deviations seems to be associated with multiple factors, not only regulatory changes. Most of these do not display a uniform importance across currency pairs and time, and some are associated with possible temporary considerations (such as asynchronous monetary policy cycles).
Download or read book Exchange Rate Theory and Practice written by John F. Bilson and published by University of Chicago Press. This book was released on 2007-12-01 with total page 542 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume grew out of a National Bureau of Economic Research conference on exchange rates held in Bellagio, Italy, in 1982. In it, the world's most respected international monetary economists discuss three significant new views on the economics of exchange rates - Rudiger Dornbusch's overshooting model, Jacob Frenkel's and Michael Mussa's asset market variants, and Pentti Kouri's current account/portfolio approach. Their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today, including those of the European Monetary System.
Download or read book The Microstructure of Foreign Exchange Markets written by Jeffrey A. Frankel and published by University of Chicago Press. This book was released on 2009-05-15 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: The foreign exchange market is the largest, fastest-growing financial market in the world. Yet conventional macroeconomic approaches do not explain why people trade foreign exchange. At the same time, they fail to explain the short-run determinants of the exchange rate. These nine innovative essays use a microstructure approach to analyze the workings of the foreign exchange market, with special emphasis on institutional aspects and the actual behavior of market participants. They examine the volume of transactions, heterogeneity of traders, the time of day and location of trading, the bid-ask spread, and the high level of exchange rate volatility that has puzzled many observers. They also consider the structure of the market, including such issues as nontransparency, asymmetric information, liquidity trading, the use of automated brokers, the relationship between spot and derivative markets, and the importance of systemic risk in the market. This timely volume will be essential reading for anyone interested in the economics of international finance.
Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Download or read book Estimating and Interpreting Forward Interest Rates written by Mr.Lars E. O. Svensson and published by International Monetary Fund. This book was released on 1994-09-01 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: The use of forward interest rates as a monetary policy indicator is demonstrated, using Sweden 1992-1994 as an example. The forward rates are interpreted as indicating market expectations of the time-path of future interest rates, future inflation rates, and future currency depreciation rates. They separate market expectations for the short-, medium-, and long-term more easily than the standard yield curve. Forward rates are estimated with an extended and more flexible version of Nelson and Siegel’s functional form.
Download or read book International Reserves and Foreign Currency Liquidity written by International Monetary Fund. Statistics Dept. and published by International Monetary Fund. This book was released on 2015-01-07 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: This update of the guidelines published in 2001 sets forth the underlying framework for the Reserves Data Template and provides operational advice for its use. The updated version also includes three new appendices aimed at assisting member countries in reporting the required data.
