The missing risk premium in exchange rates
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TLDR
This article used a present-value model of the real exchange rate to impose structure on the currency risk premium and found that the missing risk premium, not the interest rate differential, explains most of the variation in the real currency exchange rate.Citations
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Asymmetric impact of Sino-US interest rate differentials and Economic Policy Uncertainty ratio on RMB exchange rate
Shaobo Long,Rui Zhan,Jing Hao +2 more
TL;DR: In this article , the authors investigated the asymmetric relationship between Sino-US interest rate differentials, economic policy uncertainty (EPU) ratio, and the RMB exchange rate both in the long and short run.
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Pricing Currency Risks
TL;DR: In this paper , a mean-variance efficient portfolio of individual currencies is constructed, where the fraction of risk in these assets that does not affect their risk premiums is at least 85%.
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Exchange rate spillover, carry trades, and the COVID-19 pandemic
TL;DR: This article examined the interconnections and spillovers of G10 currencies over the period from January 1, 2018 to June 17, 2021 and found that the Euro and Australian dollar serve as risk transmitters whereas the Japanese yen operates as a risk recipient.
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Upside and downside correlated jump risk premia of currency options and expected returns
TL;DR: In this paper , a correlated asymmetric jump model is proposed to capture the co-movement of correlated jump risks for the three rates and identify the correlated jump risk premia.
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FDI Commitments Increase When Uncertainty is Resolved: Evidence from Asia
TL;DR: In this paper , the commitment ratio, defined as the ratio of the two FDI flows, in the context of China, Indonesia, the Philippines and Thailand over 1996-2013, was studied.
References
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A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
Posted Content
A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelationconsistent Covariance Matrix
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
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Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis
TL;DR: In this article, the authors examined the hypothesis that the expected rate of return to speculation in the forward foreign exchange market is zero; that is, the logarithm of the forward exchange rate is the market's conditional expectation of the future spot rate, and they were able to reject the simple market efficiency hypothesis for exchange rates from the 1970s and the 1920s.
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Forward and spot exchange rates
TL;DR: In this paper, the authors find that most of the variation in forward rates is variation in premium, and the premium and expected future spot rate components of forward rates are negatively correlated, and they conclude that the forward market is not efficient or rational.
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The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970–2004
TL;DR: In this paper, the authors construct estimates of external assets and liabilities for 145 countries for 1970-2004, focusing on trends in net and gross external positions, and the composition of international portfolios.