In many countries, settlements take place a fixed number of business days after the transaction (United States, Japan). In other countries, settlements take place periodically on a fixed date when all transactions performed before this date are settled (United Kingdom, France, Italy). In both...

Departures from purchasing power parity imply that different countries have different prices for goods when a common numeraire is used. Stochastic changes in exchange rates are associated with changes in these prices and constitute additional sources of risk in asset pricing models. This article...