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We test for the pricing of exchange rate and foreign inflation risk in equities. Our tests are motivated by the … Adler and Dumas (1983). Both exchange rate and foreign inflation risk factors can explain part of the within-country cross …-sectional variation in returns. Our results have important implications for hedging exchange rate risk. They also demonstrate that home …
Persistent link: https://www.econbiz.de/10005504518
generalized version of the uncovered interest rate parity and expectations hypothesis in favor of models with varying risk premia …
Persistent link: https://www.econbiz.de/10011083673
, investment, and asset prices over time, as well as perceived policy risk. Quite generally, perceived risk abates as current …. The approach thus provides a measure of the evolution over time of perceived political risk from market prices. We next … compute option prices under the process generated by the model's hazard rate of policy reversal plus an additional market risk …
Persistent link: https://www.econbiz.de/10005656360
internationally complete financial markets, risk sharing is limited and the equilibrium allocation may be inefficient, depending on … partially circumvent the segmentation, allowing for efficient risk sharing. …
Persistent link: https://www.econbiz.de/10005662013
protected good, exporting it or refraining from trade in it. The domestic price of the protected good exceeds the world price in … of a quota unless it is binding. Within a general equilibrium world economy consisting of one quota-constrained and one …
Persistent link: https://www.econbiz.de/10005662103
This paper reconsiders the role of foreign investors in developed country equity markets. It presents a quantitative model of trading that is built around two new assumptions about investor sophistication: (i) both the foreign and domestic populations contain investors with superior information...
Persistent link: https://www.econbiz.de/10005791707
-short portfolio strategy yields 12-15 percent annualized, after risk adjustment. …
Persistent link: https://www.econbiz.de/10008854544
We model the demand-pressure effect on prices when options cannot be perfectly hedged. The model shows that demand pressure in one option contract increases its price by an amount proportional to the variance of the unhedgeable part of the option. Similarly, the demand pressure increases the...
Persistent link: https://www.econbiz.de/10005067592
, when the fraction of qualified owners is smaller, or when risk aversion, volatility, or hedging demand are larger. Supply …
Persistent link: https://www.econbiz.de/10005661894
assess and price the risk of default. In order to analyse default risk in the macroeconomy, a simple general equilibrium … model with banks and financial intermediation is constructed in which default-risk can be priced. It is shown how the credit … spread can be attributed largely to the risk of default and how excess loan creation may emerge due different attitudes to …
Persistent link: https://www.econbiz.de/10009293986