Ferreira, Miguel A. (contributor); … - 2004 - [Elektronische Ressource], rev
is the continuously compounded three-month interest rate (annualized). Define the
value of a US$ investment tomorrow to …-coupon bond
investment. In the US case, Y
US$t+1
= P
US$t+1
, hence
R
US$t+1
= −
1
4
(r
US$t+1
−r
US$t
). (17)
The value of the DM …-coupon bond investment given by:
ln(Y
DMt+1
)−ln(Y
DMt
)=R
DMt+1
−∆ln
¡
s
DM/US$t+1
¢
, (19)
15
We use bond returns implied by …