Asymmetries in the sport-forward G10 exchange rates: an answer to an old puzzle?

This paper provides evidence on the existence of asymmetries in the underlying loss preferences for the difference between the spot and forward nominal exchange rate. We find that, in the context of both linear and non-linear loss functions, the underlying loss preferences for monthly data are predominantly asymmetric, whilst for weekly exchange rates asymmetry tends to weaken. In a second stage we run cross section regressions to examine what variables drive this asymmetry. Interestingly, besides some macroeconomic variables, such as the growth rate and price changes, political and security risk assert some significant impact on asymmetry.